August 2025 Financial Markets and Specialised Institutions Past Paper Answers

Description

QUESTION ONE
(a) Outline FOUR characteristics of a well-functioning financial system. (4 marks)
(b) Explain THREE differences between “investment banks” and “retail banks” in the financial services industry.
(6 marks)
(c) Explain FIVE legal requirements for the appointment of a central depository agent. (10 marks)
(Total: 20 marks)
QUESTION TWO
(a) Summarise FOUR limitations of cross-border listing for an investing company. (4 marks)
(b) With respect to financial inclusion and deepening, analyse THREE factors that influence liquidity levels in financial markets. (6 marks)
(c) Examine FIVE functions of financial markets in an economy. (10 marks)
(Total: 20 marks)
QUESTION THREE
(a) Describe THREE challenges faced by financial institutions while implementing anti-money laundering interventions. (6 marks)
(b) Jamaa Bank Ltd. has been hit by a bank run.
Advise the management of Jamaa Bank Ltd. on THREE responses to this phenomenon. (6 marks)
(c) Explain FOUR risk management strategies that may be adopted by financial institutions to mitigate asymmetric information risks. (8 marks)
(Total: 20 marks)
QUESTION FOUR
(a) In relation to mortgage market, describe FOUR criteria used to establish the creditworthiness of a borrower.
(4 marks)
(b) Identify FOUR methods that could be used by investors to invest in foreign securities. (4 marks)

(c) Explain THREE risks that could be associated with trading derivative contracts. (6 marks)
(d) JKL Ltd. has appointed Speedway Ltd. as its lead underwriter for an upcoming initial public offer.
Analyse THREE roles of Speedway Ltd. in the initial public offer (IPO) of JKL Ltd. (6 marks)
(Total: 20 marks)
QUESTION FIVE
(a) Highlight FOUR challenges faced by non-governmental organisations in maintaining financial transparency.
(4 marks)
(b) Analyse FOUR strategies that might be adopted to combat terrorism financing in financial markets in your country. (8 marks)
(c) Discuss FOUR regulatory measures used to prevent market manipulation through insider trading. (8 marks)
(Total: 20 marks)