Description

Financial Institutions and Markets

September 2024 Examination

 

 

Q1. As a financial advisor at your advisory firm, you have a client who is seeking to diversify their investment portfolio by venturing into capital market instruments alongside their existing investments. This discussion will enable your client to make informed decisions regarding their investment strategy and portfolio diversification. Assist your client by providing comprehensive insights into various capital market instrument including their key characteristics. (10 Marks)

Ans 1.

Introduction

Capital markets play a crucial role in the financial ecosystem, providing a platform where savings and investments are channeled between suppliers who have capital and those who are in need of capital. For an investor looking to diversify their portfolio, capital market instruments offer a variety of options that can potentially enhance returns while spreading risk. These instruments include stocks, bonds, debentures, derivatives, and mutual funds, each with unique characteristics and risk-return profiles. Understanding these instruments is essential for making informed investment decisions. Stocks represent ownership in a company and typically offer higher returns but come with greater risk. Bonds and debentures, on the other hand, are debt

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Q2. Sunshine Ltd. Corporation, a fast-growing technology startup, is poised for expansion and seeks to raise capital to fund its ambitious growth plans. The company’s management team, led by CEO John Ceth , recognizes the importance of strategically accessing the primary market to secure the necessary funds. As an advisor to the company, help the corporation to provide a brief overview on the numerous techniques as how the corporation can raise fresh capital in the primary market.   (10 Marks)

Ans 2.

Introduction

Sunshine Ltd., a rapidly expanding technology startup, is at a critical juncture where securing fresh capital is essential to fuel its growth and achieve its ambitious objectives. The primary market, where new securities are issued and sold for the first time, offers a range of avenues for raising capital. These methods include initial public offerings (IPOs), rights issues, private placements, and preferential allotments. Each method comes with its unique benefits and challenges, making it crucial for the management team, led by CEO John Ceth, to carefully consider the most appropriate strategy. As an advisor to Sunshine Ltd., it is imperative to provide a comprehensive overview of these primary market techniques, helping the company

Q3a. “The capital market, a crucial component of the global financial system, serves as a platform  for investors  to buy  and  sell  securities,  facilitating  the allocation  of capital  to businesses and governments. However, amidst the myriad opportunities for growth and investment, instances of scams and fraudulent activities have tarnished the integrity of the capital market “. Provide examples of regulatory interventions and their impact on restoring investor confidence. Conclude with recommendations for enhancing regulatory effectiveness in combating financial misconduct.  (5 Marks)

Ans 3a.

Introduction

The capital market, integral to the global financial system, enables investors to trade securities, ensuring efficient capital allocation to businesses and governments. However, the prevalence of scams and fraudulent activities has, at times, undermined market integrity, eroding investor confidence. Regulatory interventions play a crucial role in restoring trust and safeguarding the market. This discussion will explore notable examples of such interventions and their impact,

environment, thereby sustaining investor confidence and promoting long-term growth.

 

Q3b. India’s financial sector plays a crucial role in driving economic growth and stability. As MBA students specializing in finance, it is imperative to have a comprehensive understanding of the regulatory landscape governing financial institutions in India. Discuss the various financial Regulatory Institutions in India with their functions.  (5 Marks)

Ans 3b.

Introduction

India’s financial sector is fundamental to the nation’s economic growth and stability, regulated by a robust framework of institutions to ensure its efficient functioning and integrity. As MBA students specializing in finance, understanding these regulatory bodies is essential for navigating and contributing to the sector. Key regulatory institutions in India include the Reserve Bank of India (RBI), Securities and Exchange Board of India (SEBI), Insurance