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Assume that your father is now 50. Years old that he plans to retire in 10years and that he expects to live for 25 years after he retire.that is until he is 85 years .he wants a fixed retirement income that has the same purchasing power at the time he retires as$40000 he has today. He realizes that the real value of his retirement income will decline year by year after he retires .his retirement income will begin the day he retires 10 years from today and he will get 24 additional annual payment.inflation is expected to be 5%per from today forward .he currently has $100000 saved up and he expects to earn a return on his saving of 8%per year annual compounding .to the nearest dollar how much must he save during each year of the next 10years with deposit being made at the end of each year to meet his retirement goal
1. Compute for the interest of a loan of P250,000 dated January 1, 2016 and payable on November 13, 2016 assuming the rate is 12% using the following: (20 points)
a. Actual Time-Exact Interest Method
b. Approximate Time-Exact Interest Method
c. Actual Time-Ordinary Interest Method
d. Approximate Time-Ordinary Interest Method
How much would you be willing to pay today for an investment that would return$ 800 each year at the end of each the next 6 years. Ausmus a discount rate of 5 percent
What is risk management? Discuss the two major ways in which exposure can be managed or reduced
(a) Discuss in detail the roles played by financial institutions (FIs) in the economy with particular reference to Zambia citing particular examples of financial institutions that you are familiar with in Zambia.
(b)List and explain the major risks that financial institutions in general face? How do these risks manifest or affect the FIs?
(a)Explain the five (5) main solutions to the challenges of the barter system.
(b)Briefly explain the difference between an asset and a liability on a bank’s balance sheet. How does net worth relate to each? Why must a balance sheet always balance?
(c)List and briefly explain the major assets and claims on a commercial bank’s balance sheet.
Mr. Ahmed retired as president of the Master Tile Company but is currently on consulting contract for Rs. 450,000 per year for next 10 years. a. If Mr. Ahmed’s opportunity cost is 10 percent, what is the present value of his consulting contract? b. Assuming that Mr. Ahmed will not retire for two more years and will not start to receive his 10 payments until the end of third year, what would be the value of his deferred annuity?
Angro Foods had Rs. 450,000 of retained earnings on December 31st 2020.The company paid common dividend of Rs. 25,000 in 2020 and the had retained earning balance on December 31st 2019 of Rs. 400,000. Calculate Net income, EPS and Dividend per share for 2020. Outstanding common shares are 20,000 shares.
QUESTION ONE
Explain the factors determine money demand in Fisher’s quantity theory and how each affect money demand? What determines velocity in Fisher’s theory? What effect do interest rates have on velocity?
Identify the following with a sentence or at most two and give an example in each one (I)Multiplier
(ii)Monetary aggregate
(iii)Money illusion
(iv)Dollarization
(v)Devaluation
QUESTION TWO
(a)Suppose that the price level in Zambia is measured at 14% and is expected to rise by 3% over the next six months.
(b)Explain the costs associated with this expected inflation.
(c)Explain the other costs that Zambia will face if the inflation unexpectedly turns out to be 30%.
(d)Explain of the role of the banking system in the effective implementation of monetary policy.
(e)Explain the difference between reserve requirements and capital requirements for banks, and what differing purposes do they reflect.
QUESTION THREE
(a)Explain the five (5) main solutions to the challenges of the barter system.
(b)Briefly explain the difference between an asset and a liability on a bank’s balance sheet. How does net worth relate to each? Why must a balance sheet always balance?
(c)List and briefly explain the major assets and claims on a commercial bank’s balance sheet.
QUESTION FOUR
(a)In September 2020, The Bank of Zambia announced a slight reduction in the statutory reserve ratio assuming from 10% to 9%. Explain how this kind of reduction in the statutory reserve ratio would affect the:
Size of the money multiplier,
(b)Amount of excess reserves in the banking system, and
Extent to which the system could expand the money supply through the creation of checkable deposits via loans?
(c)Demonstrate your understanding of the terms below by way of a brief explanation of each;
(I)Seigniorage
(ii)Nominal Anchor for Monetary policy
(iii)Monetary policy rate
(ivCost push inflation
(v)Monetary system
QUESTION FIVE
The growth of the financial sector as triggered by the structural adjustment programs implemented in the early 1990s has opened up significant opportunities for the private sector. Through various liberalisation policies there has been a proliferation of financial institutions, both depository and non-depository.
The Zambian financial markets landscape has also registered numerous financial institutions aimed at enhancing their intermediary roles and innovations. These innovations have most undoubtedly been as a consequence of the desire by financial institutions to grow and increase their market share sustainably.
In 1993, the collaborative efforts of the International Finance Corporation (IFC) and the World Bank led to establishment of the Lusaka Securities Exchange Plc. (LuSE).
LuSE opened its doors for business on 21st February 1994. It was also motivated by the need to deepen awareness and understanding of financial and capital markets in support of the emerging private sector. And this had contributed significantly to the country’s economic activities hence a stable GDP growth (World Bank, 2013).
On the debt market front, the Zambian government is also mindful of the need to maintain debt sustainability to safeguard macroeconomic stability. Total debt as a percentage of GDP stood at 59% in 2018. There have been concerns as to the Government’s fiscal management on its high debt obligations with its debut US $750 million Eurobond falling due for repayment in 2022. This repayment comes amid heightened repayments risks, downgraded credit rating and the unmeasured effects of global health pandemic (COVID-19).
Required:
(a)Briefly explain the terms highlighted in bold from the passage above.
(b)Describe and explain the five (5) roles played by the Lusaka Securities Exchange (LuSE).
(c)What would be your recommendations to help manage Zambia’s debt and ensure she does not default come 2022?
QUESTION ONE
(a) Discuss in detail the roles played by financial institutions (FIs) in the economy with particular reference to Zambia citing particular examples of financial institutions that you are familiar with in Zambia.
(b)List and explain the major risks that financial institutions in general face? How do these risks manifest or affect the FIs?
QUESTION TWO
(I) Using appropriate illustrations discuss in detail the factors that affect demand for loanable funds according to the Loanable Funds Theory of interest rate determination.
(ii) What impact would these have on demand and supply of funds and on the interest rate?
QUESTION THREE
(a) Discuss the term Monetary Policy in relation to the Zambian economy.
(b) Zambia as a developing country may have problems in establishing an effective operating Monetary Policy.
(I) Explain at least five major problems which may prevent Zambia from establishing an effective Monetary Policy.
(ii)Describe the main Monetary Policy tools which Zambia may use to influence economic growth.
QUESTION FOUR
(a)What is risk management? Discuss the two major ways in which exposure can be managed and/or reduced.
(b)Financial institutions face a number of risks in their operations. How are these risks mitigated or managed? What techniques are used to mitigate each type of risk you have identified?
