7SSMM702 MOCK MID-TERM 2023-2024
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MOCK MID-TERM COMPUTER-BASED EXAM
7SSMM702
2023-2024
THIS IS A MOCK EXAM PAPER
PLEASE NOTE THAT ESSAY TYPE ANSWERS ARE INDICATIVE
Students need to answer the question by showing in-depth understanding of the topic providing additional examples and a structured essay.
Section A: Multiple Choice Questions (each counts for 5 marks. Total is 30). Answer ALL.
1. The concept of adverse selection helps to explain
a) which firms are more likely to obtain funds from banks and other financial intermediaries, rather than from the securities markets.
b) why indirect finance is more important than direct finance as a source of business finance.
c) why direct finance is more important than indirect finance as a source of business finance.
d) only A and B of the above.
e) only A and C of the above.
2. Which of the following is not TRUE for the financial ratio analysis?
a) The ratios are not exhaustive.
b) Comparisons with other firms can only be made with firms of the same size and activity.
c) Generally one year’s figures are sufficient.
d) Ratios don’t stand in isolation: they are interrelated.
3. Define scale economies in banking
a) Scale economies relate to the average cost of production falling as output increases, (ceteris paribus), all other things being equal.
b) Scale economies relate to the average cost of production increasing as output increases, (ceteris paribus), all other things being equal.
c) Scale economies relate to cost savings brought about through joint production.
d) Scale economies relates to efficiencies brought about by a superior management & use of technology.
4. Which of the following statements is FALSE?
a) Data Envelopment Analysis (DEA) uses linear programming techniques to estimate efficiency.
b) Stochastic Frontier Analysis (SFA) is the dominant in the parametric approaches
c) Data Envelopment Analysis (DEA) requires a pre-specified functional form.
d) Stochastic Frontier Analysis (SFA) has an error term in the estimation of efficiency.
5. Which of the following graphs represent the Profit and loss profile for the buyer of a call option.
a)
b)
c)
d)
6. Non-depository financial institutions are represented by all of the following EXCEPT
a) insurance companies.
b) mutual funds.
c) Finance companies.
d) credit unions.
Section B: Essay Type Questions (please answer 2 out of 4 questions. Each Question counts for 35 marks)
Question 1
Briefly outline the true sales securitisation process and the key participants involved.
Question 2
Briefly outline and discuss the main techniques used to calculate efficiency.
Question 3
“Liquidity always comes first; without it a bank doesn’t open its doors; with it, a bank may have time to solve its basic problems”. Discuss.
Question 4
Explain how deposit-taking institutions (DTIs) differ from non deposit-taking institutions (NDFI) in their sources and uses of funds?
2023-12-22