[This question paper contains 3 pages]

Unique Paper Code : 61011604

Name of Paper : Financial Institutions and Markets
Name of Course : Bachelors of Management Studies (BMS)
Semester : VI
Duration : 2 Hours
Maximum Numbers : 75 Marks

Instructions for Candidates:

1. This paper contains 6 questions. Attempt ANY FOUR questions.

2. All questions carry equal marks.

Q1. Non-Banking Finance Companies (NBFC’s) are vital for the Indian economy.
A series of problems have been hurting the Indian NBFC sector since the
default of infrastructure finance major IL&FS in September 2018. In current
situation Non-banking financial companies (NBFCs) are more vulnerable to
the risks brought on than Banks. Explain the features and functions performed
by NBFCs in the economy. Are NBFC better than Banks? Also, explain the
concept and need of universal banking system.

Q2. ‘There are variety of financial markets which make up the field of finance and
aids in financial deepening and broadening’. Explain the different types of
financial markets and how do they effect performance of an economy. Also,
explain the points of difference between Rights issue and Bonus issue.

Q3. Disinvestment in most cases are primarily motivated by the optimization of

resources to deliver maximum returns. To achieve this objective,
 disinvestment may take the form of selling, spinning off or reducing capital
expenditure. Explain the concept and need of disinvestment with the help of
suitable examples. How is it different from strategic sale?

Q4. ‘Interest rates in international markets are less than those prevailing in the
domestic market, raising funds from abroad is more economical for Indian
companies’. Explain the above statement and various instruments used to raise
financial resources from international markets. Also, differentiate between
free float and full float methodology

Q5. A Business entity issues a commercial paper worth Rs. 10,00,000 which will
be redeemable after completion of 90 days. If the discount is 2%, Find out the
rate of interest on this commercial paper. Also, determine the net cost incurred
by the organization, if brokerage charged was 1%. The company utilized the
sum for 60 days only, and the amount was invested in the share markets for 30
days which yield returns @ 18% p.a. (assume no of days in a year 360).

Tom invested Rs. 10,000 in CD with the bank at a fixed interest rate of 5%
and maturity in 5 years. He decides to withdraw the money before maturity at
the end of year 3. The early withdrawal penalty is 6 months interest. Calculate
the amount he will get at the end of three years. Since Tom withdraws money
before the maturity period, find out the amount of an early withdrawal penalty
he needs to pay.

‘The debt markets play a pivotal role in economy as an important part of the
financial system. In developed economies, the size of debt markets is a
substantial percentage of their GDP. Indian debt market is also larger than its
equity market in volume’. Comment bringing out the evolutionary journey of
Indian debt market over the last decade.

Q6. RBI issued a 91-day Treasury bill of Rs.100/- (face value) issued at Rs. 98.30
at a discount of Rs.1.70 and would be redeemed at the face value of Rs.100/-.
Calculate Yield/Return to the investors. Also, calculate the yield if after 41
days the same bill will be trading at Rs.99. (assume no of days in a year 365).

Assume that stocks A1, A2 and A3 constitute the sample companies for the
computation of an index. The base index is 100 and the base date price and
current market prices are given below. Compute the current stock index when
no change in share representation takes place, dividends or stock splits have
not occurred, and no additional shares have been issued. Use the market value
weighted method and price weighted method. Also comment why the two
indices do not match.

Share Outstanding Base price Current price

shares (Rs.) (Rs.)
A1 5,00,000 120 200
A2 8,00,000 150 900
A3 6,00,000 110 150