BBS 3rd year
Subject: Foundation of Financial System in Nepal
Group A: Brief Answer Questions
(10 x 2=20)
Attempt ALL questions;
1. What do you mean by indirect process of fund transfer?
2. List out the major types of capital market instruments.
3. State the role of risk management industry.
4. Write the meaning of credit rating agencies,
5. Define primary market in Nepal with example.
6. What is Balance of Payments?
7. XYZ fund, closed-end fund consist of three securities; A,B and C. It has 10,000 shares of
A, which currently trading Rs.14; 20,000 shares of securities B currently trading for Rs.
17 and 10,000 shares of security C currently trading for Rs.21. The fund has Rs. 50,000 in
net liabilities and 50,000 shares outstanding. What is the net value asset per share?
8. Calculate return on assets if profit margin ratio is 7% and assets utilization ratio is 1.5
times.
9. A T-bil with face value Rs 10,000 and 91 days to maturity is selling at Rs 9600, what will
be annual yield on T-bill?
10. Gap ratio of Bank P and Bank Q are 30% and 40% respectively. Which bank is more
interest rate sensitive?
Group B: Descriptive Answer Questions
(5x 10= 50)
Attempt FIVE questions.
11. What do you mean by the financial intermediaries? Describe the functions of financial
intermediaries in financial system.
12. The yield on 1-year Treasury securities is 5%, 2-year securities yield 5.5% and 3-year
securities yield 6%. There is no maturity risk. Using expectation theory, forecast the
yields on the following securities:
a) One-year securities, 1year from now.
b) One year securities, 2 year from now.
c) Two year securities, 1 year from now.
13. Explain the functions of credit rating agencies in Nepal.
14. What functions Nepal Rastra Bank carries out as a fiscal agent of government of Nepal ?
15. Nepal Development Bank plans to raise an additional Rs 100 million through rights
offerings. Current market price per share of the bank is Rs 250. It has 2,000,000 shares
outstanding. Stockholders are offered a new share at a price Rs 100 each.
a) How many new shares will have to be sold to raise required funds?
b) How many rights will be required to purchase a new share?
c) Calculate the theoretical value of a right.
d) Calculate ex-right price.
e) A right when it goes ex-right and the actual market price goes to Rs 170 per
share.
16. Consider the following summary of BOP for the fiscal year 2021/22.(Rs in million)
Particular Credit Debit
Goods 352,145 1,367,765
Services 253,325 652,843
Primary income 76,543 35,256
Secondary income 766,643 8,742
a) What is the net of goods and services account during the fiscal year?
b) What is the net of primary income account and secondary income account
during the fiscal year?
c) What is the trade deficit/surplus during the fiscal year?
d) Which accounts have contributed to increase the current account deficit?
e) Which accounts have contributed to decrease the current account deficit?
Group C: Analytical Answer Questions
(2 x 15=30)
Attempt TWO questions.
17. Define the non-depository institutions and explain major types of non-depository
institutions.
18. The following quote for the Nabil Bank was obtained from the Tuesday, July 7 issue of a
financial newspaper.
52 Weeks Stock Div Yid (%) PE Vol 100s Close Net Chg
Hi Lo
302 240 NB 5 2 13 330 250 -1
Given this information, answer the following questions:
a) On what did the trading activity occur?
b) At what price did the stock sell at the end of the day on Monday, July 6?
c) What is the firm‘s price-earnings ratio? What does that indicate?
d) What is the last price at which the stock traded on the date quoted?
e) How large a dividend is expected in the current year?
f) What are the highest and lowest prices at which the stock traded during the
latest 52-weeks period?
g) How many shares of stock were traded on the day quoted?
h) How much, if any, of a change in price took place between the day quoted and
the immediately preceding day? At what price did the stock close on the
immediately preceding day?
19. a. Calculate the required loan rate from the following given below.
Particular Cost%
Cost of funds 4.5
Provision for loan losses 1.0
Direct expenses 0.3
Indirect expenses 0.1
Overhead 0.1
Opportunity cost of equity capital 12.0
The tax rate applicable to the bank is 25% and equity capital allowed to loan is 20%.
a) What is the capital charge?
b) What is total required loan rate?
c) When does bank earn target return on equity?
d) When dose bank earn economic profit ?
e) Show the return on equity on Rs 3,000 million loan.
b. The ABC Growth Fund, a closed-end investment company, has a portfolio of assets worth Rs
1,000 million. It has liabilities of Rs million. It also has 80 million shares outstanding.
a) What is the NAV?
b) If the fund trades at 5% discount from its NAV, what is the market price of the fund’s
shares?
THE -END
