Birkbeck College: Financial Markets (July 2009 ) Exam

Time: 1.5 hours.

Part A

Please answer all questions in Part A.

1. How has the composition of share ownership on the LSE changed in recent years?

2. How does a forward contract differ from an options contract?

3. What is a ‘Market transaction’ compared to an ‘OTC’ transaction?

4. What is the difference between a Treasury Bond market and a Corporate Bond
market?

5. How is the ‘rate of discount’ different from a ‘rate of interest’ ?

6. What is a financial future? Give two examples.

7. Why are there many different stock indices, as published in the financial press?

8. What is a Credit default Swap?

9. What is the difference between a coupon and a yield?

10. Distinguish between an equity and a preference share.

Part A: 40 marks
Part B

Please answer two questions in Part B.

11. Briefly explain how the present UK financial difficulties have been generated
from the sub-prime crises in the USA after June 2007.

12. Explain how the participants in an interest rate swap may both reduce the cost of
their borrowing.

13. What methods can you offer to value (i) a bond and (ii) a share?

14. Distinguish between internal and external methods of hedging risks by

corporations. How is this different from speculation?

15. What challenges are there to London’s position as a financial centre?

Part B: 60 marks (30 for each question)