EXAM COVER SHEET

NOTE: This 1. exam paper CANNOT be RETAINED by the student

EXAMINATION DETAILS Course Code Course Description Date of exam TBA

FINANCIAL MARKETS
Start and end time of exam 2 TBA Duration of exam including reading time Pages 2 hrs15 mins

Total number of pages (incl. this cover sheet)

Instructions to Candidates 1. Write your full name and student number on each exam booklet together with the number of exam books used. 2. This is a CLOSED BOOK Exam. 3. Students must not write, mark in any way any exam materials, read any other text other than the exam paper or do any calculations during reading time. 4. All mobile phones must be switched off and placed under your desk. You are in breach of exam conditions if it is on your person (ie. pocket). 5. Commence each question on a new page. Carry out the instructions on the front cover of the exam script book and the front of this exam paper. 6. Non text storing calculators are allowed. 7. Bi-lingual dictionaries are not allowed. 8. Write your full name and student number on each examination booklet and on the multiple choice answer sheet. 9. Answer any six questions out of ten. 10. The total exam carries 60 marks and contributes sixty percent of the total assessment of the course. Each question carry 10 marks. 11. The entire examination question paper and multiple choice answer sheet is to be included with your examination answer booklets and MUST NOT BE REMOVED FROM THE EXAMINATION ROOM.

Essay Questions

(Total 60 marks)

Answer Six Questions ONLY

Question 1 Explain how the total assets of financial institutions have changed after the GFC? (10 Marks) Question 2 Explain how the GFC affected the efficiency of the financial system. (10 Marks) Question 3 Discuss how the recent environmental regulations have affected the risk and returns of equity markets. (10 Marks) Question 4 Discuss what has happened to the amount of securitised asset in Australia after the GFC. (10 Marks) Question 5 An extension of the GFC is the so-called euro sovereign debt crisis. Discuss its impact on the international debt market. (10 Marks) Question 6 Discuss the factors that influence exchange rate movements and briefly explain their role during a financial crisis period. (10 Marks) Question 7 Discuss what happens to government borrowing during a crisis period. (10 Marks) Question 8 Discuss how futures contracts are used in a market downturn like the GFC. (10 Marks) Question 9 Discuss how options are used in a market downturn like the GFC (10 Marks) Question 10 Explain the contribution of credit risk to the GFC. (10 Marks)

Solutions

Question 1 Explain how the total assets of financial institutions have changed after the GFC. Table 1.1 on page 10 provides a potential explanation. Read pages 9 to 11 for more explanation. Question 2 Explain how the GFC affected the efficiency of the financial system. In this case you can discuss how the (1) savings patterns have changed, (2) monetary policies were used to influence interest rate, (3) risk, return, liquidity of investors have change. You can read about these concepts on page 8 but you will have to conduct your own additional research. Question 3 Discuss how the recent environmental regulations have affected the risk and returns of equity markets. Read the Ramiah, Martin and Moosa (2013) paper and note you do not have to read the methodology section. Have a discussion around the risk and returns of polluters and environmentally friendly industries.

Question 4 Discuss what has happened to the amount of securitised asset in Australia after the GFC. Read page 347 to 350 of the textbook.

Question 5 An extension of the GFC is the so-called euro sovereign debt crisis. Discuss its impact on the international debt market. Read page 379 to 381. Question 6 Discuss the factors that influence exchange rate movements and briefly explain their role during a financial crisis period. Read page 530 onwards. You will have to think about the financial crisis section and also carry out some research.

Question 7 Discuss what happens to government borrowing during a crisis period. Read page 396-400. Question 8 Discuss how futures contracts are used in a market downturn like the GFC. See Chapters 18 to 21 2

Question 9 Discuss how options are used in a market downturn like the GFC. See Chapters 18 to 21 Question 10 Explain the contribution of credit risk to the GFC. See Chapters 18 to 21