| ST. JOSEPH’S COLLEGE OF COMMERCE (AUTONOMOUS) | ||
| END SEMESTER EXAMINATION – MARCH/APRIL 2015 | ||
| BBM – IV Semester | ||
| M1 11 402: FINANCIAL MARKETS AND SERVICES | ||
| Duration: 3 Hours Max. Marks: 100 | ||
| SECTION – A | ||
| I) | Answer ALL the questions. Each carries 2 marks. (10×2=20) | |
| 1. | What do you mean by Derivatives? | |
| 2. | Distinguish between ‘with recourse factoring’ and ‘without recourse factoring’. | |
| 3. | Write a brief note about the organization structure of mutual funds. | |
| 4. | State any two features of venture capital. | |
| 5. | What is the difference between a jobber and a broker? | |
| 6. | List out the various types of credit rating? | |
| 7. | 1. What do you understand by the term Export factoring? | |
| 8. | Mention any two objectives of SEBI. | |
| 9. | What is the difference between Open repurchase agreement and Term repurchase agreement? | |
| 10. | Write any two advantages of financial lease. | |
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SECTION – B |
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| II) | Answer any FOUR questions. Each carries 5 marks. (4×5=20) | |
| 11. | What is mutual fund? Explain the various risks associated with mutual fund. | |
| 12. | Distinguish between new issue market and Secondary market. | |
| 13. | Briefly explain the benefits of rating financial instruments to both investors and to the issuers. | |
| 14. | What do you mean by Fee based financial services? Explain any five fee based services. | |
| 15. | Explain the various stages of Venture Capital financing. | |
| 16. | Write a brief note on any two stock indices. | |
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SECTION – C |
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| III) | Answer any THREE questions. Each carries 15 marks. (3×15=45) | |
| 17. | What do you mean by financial markets? Explain in detail any seven long term and short term financial instruments that are available in the financial markets for investments. | |
| 18. | Mr. Ashok had started a small scale business in the year 2013; a lot of his working capital is tied up in the form of trade debts because of credit sales. In this situation Mr. Ashok approaches a financial service provider to help him to overcome his working capital crisis.
What is the financial service provided? Explain its types.
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| 19. | a. Explain the process involved in credit rating a particular debt instrument of a company by a credit rating agency.
b. Write a short note on the following credit rating agencies i) CRISIL ii) ICRA |
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| 20. | What is venture capital? Explain the various methods adopted by the venture capitalists to fund the entrepreneur’s projects and the exit routes to quit the business. | |
| 21. | Define leasing. Explain the different types of leasing. | |
| SECTION – D | ||
| IV) | Case Study (1×15=15) | |
| 22. | Carson Company is a large manufacturing firm in California that was created 20 years ago by the Carson family. It was initially financed with an equity investment by the Carson family and ten other individuals. Over time, Carson Company has obtained substantial loans from finance companies and commercial banks. The interest rate on the loans is tied to market interest rates and is adjusted every six months. Thus, Carson’s cost of obtaining funds is sensitive to interest rate movements. It has a credit line with the bank in case it suddenly needs to obtain funds for a temporary period. It has purchased Treasury securities that it could sell if it experiences any liquidity problems.
Carson Company has assets valued at about 50 million dollars and generates sales of about 100 million per year. Sum of its growth is attributed to its acquisitions of other firms. Because of its expectation of strong U.S. economy, Carson plans to grow in the future by expanding its business and through acquisitions. It expects that it will need substantial long term financing and plans to borrow additional funds either through loans or by issuing bonds. It is also considering the issuance of stock to raise funds in the next year. Carson closely monitors conditions in financial market that could affect its cash inflows and cash outflows and therefore affects its value.
Answer the following questions: a. How might finance companies facilitate Carson’s expansion? (5 marks) b. How might Carson use the primary market and secondary market to facilitate its expansion? (3 marks) c. Should Carson consider a private placement of bonds? What types of investors might be interested in participating in a private placement? Do you think Carson could offer the same yield on a private placement as it could on a public placement? Explain. (7 marks) |
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