Finance Answers

What are various laws related to banks in Zambia and how they have been applied to save banks from collapsing? 10 marks

You just won the lottery. You can take your Rs.10, 00,000 in a lump- sum today, or you can receive Rs. 100,000 at the end of every year for 12 years. You can invest your money 3%per annum. Ignoring all tax consideration, which would you prefer? But if you receive Rs.50,000at the end of every six-month as semi- annual compounding system, what could be the difference in your decision?

What are the ten key factors of the importance of the banking industry? 10marks

On 1 Jan 1998, the Katito Sand Co sent to M. Mutiso 1,000 tonnes of sand the pit cost being Sh100 per tonne. The company paid Sh10,000 towards freight and insurance. Mutiso took delivery of the consignment on 10th January 1998 and immediately accepted a bill drawn on him for Sh50,000 for 2 months. On 31st March (when the company’s books are closed) the consignee reported that:

i) There was a shortage of 50 tonnes on the whole consignment due to loading and unloading;

ii) 800 tonnes were sold at sh130 per tonne

iii) He had incurred the following expenses:

- Godown rent Sh500

- Insurance Sh500

- Selling expenses Sh1,000

iv) He had deducted his commission (4% of sales) and remitted the balance due by bank draft on 31 March 1998.

Required: Show the necessary accounts in the books of Katitu Sand Co. to record the above transactions.

What is the Marshall-Lerner condition for a stable foreign exchange market? For an

unstable market? For a depreciation to leave a nation’s Balance of Payment unchanged?

Explain expenditure-changing and expenditure-switching policies. Using the swan diagram, explain how these policies can be used to achieve external and internal balance.

Assuming that Nations 1 and 2 are both large and starting from the equilibrium level of

national income and equilibrium in the trade balance in Nation 1 and given that 𝑀𝑃𝑆1 = 0.20; 𝑀𝑃𝑆2 = 0.15; 𝑀𝑃𝑀1 = 0.20 𝑎𝑛𝑑 𝑀𝑃𝑀2 = 0.10, find the change in the

equilibrium level of national income and the trade balance in Nation 1 for:

a) An autonomous increase in the exports of Nation 1 of 200 that replaces domestic

production in Nation 2

b) An autonomous increase in investment of 200 in Nation 1

c) An autonomous increase in investment of 200 in Nation 2.

Given that 𝐶 = 100 + 0.8𝑌; 𝑀 = 150 + 0.2𝑌; 𝐼 = 100 𝑎𝑛𝑑 𝑋 = 350,

a) Determine the equilibrium income

b) Show the results on two graphs with (i) Injections and leakages on the vertical axis

(ii) Net injections and net domestic leakages on the vertical axis

c) Determine the new equilibrium and show on graph when there is;

i. An increase in X and I of 200

ii. A decrease in M of 100

iii. A decrease in S and M of 100

Assume inflation in Turkey is 50% and 2% in the US. Using the relative PPP, 

a) Calculate the exchange rate (𝑅 = 𝑇𝐿/$) and the exchange rate (𝑅 = $/𝑇𝐿).

b) Assume that the Turkish inflation increases to 100% while the US inflation remains at 2%, calculate the new exchange rate between the Turkish Lira and the US dollar.

What is the reason of having more non executive directors than executive directors? 5marks