MGT 226: - “FOUNDATIONS OF FINANCIAL SYSTEMS”

CHAPTER WISE IMPORTANT THEORY QUESTION

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CHAPTER 1: - INTRODUCTION.

 Important Theory Questions from This Chapter.

1. What is finance?
2. What is a financial system?
3. Explain the components of financial system with reference to Nepalese financial system.
4. Draw the size and structure of Nepalese financial sector.
5. What are the steps of funds transfer from surplus units to savings units?
6. What are financial intermediaries?
7. Explain the functions and role of financial intermediaries in the financial systems.
8. What are the measures of size of financial system of Nepal?
9. What are the different economic units in the economy?

CHAPTER 2: - Financial Instruments and Interest Rates.

 Important Theory Questions from This Chapter.

1. What are financial instruments?
2. Explain the different types of financial instruments available in Nepalese Financial System.
3. Different between money market and capital market.
4. What is mutual fund?
5. What are the types of mutual fund?
6. Explain the loan funds theory of interest.
7. List out the factors affecting the interest rate.
8. What are the components of interest rate?
9. Define the term structure of interest rate.
10. Mention the determination of interest rate in Nepalese financial markets.
11. Define base interest rate and interest rate spread.
12. What is interest rate corridor?
13. Define derivative securities.
14. List out the functions of financial instruments.
15. Difference between open-end funds and closed end-funds.
16. Difference between real risk-free rate and nominal risk-free rate.
17. What are the different types of money market instruments?
18. What is NAV?
 19. What are the general economic conditions could be expected to produce an upward
sloping yield curve?
20. What is default risk premium?
21. Define Expectation Theory. What are the assumptions of expectation theory?
22. What is Maturity Risk Premium?

CHAPTER 3 : - Depository Financial Institutions.

 Important Theory Questions from This Chapter.

1. What are depository institutions?
2. What are the fundamentals functions of depository institutions?
3. Explain the classifications of depository institutions in Nepal.
4. Describe the major products of depository institutions.
5. What are the needs for regulation of depository financial institutions by NRB? What are the
onsite and offsite supervision and supervisory tools?
6. State the role of saving and credit cooperatives.
7. What are the components of bank equity capital?
8. Define Profit Margin Ratio and Asset Turnover Ratio.
9. What is ROA?
10. Define non-interest income ratio and net interest margin ratio.
11. What is spread ratio?
12. Mention the financial statements of depository institutions.
13. What are the major indicators of performance of depository institutions?
14. State the structure and size and monitoring and regulation of saving and credit
cooperatives.

CHAPTER 4 : - Non-Depository Financial Institutions.

 Important Theory Questions from This Chapter.

1. What are non-depository institutions?
2. List out the types of non-depository institutions.
3. What is risk management industry?
4. List out the types of risk management industry.
5. Explain the fundamentals of risk management industry.
6. What is the role of risk management industry in the mobilization of saving and protection
of individual and social wealth?
7. What is mutual fund?
8. What are the types of mutual fund industry in Nepal?
9. Sketch the structure of mutual fund industry in Nepal.
10. Define pension funds. What are the types of pension fund in Nepal?
11. Difference between no-load and load funds.
 12. Difference between defined-benefit plan and defined-contribution pension plans.
13. What are the major types of insurance services in risk management industry?

CHAPTER 5 : - Ancillary Financial Services.

 Important Theory Questions from This Chapter.

1. What are ancillary financial services?
2. Define Investment Banking Industry.
3. What are the functions of investment banking industry?
4. Explain the structure of investment banking in Nepal.
5. What are depository participants?
6. Difference between securities dealer and securities broker.
7. Define credit rating agencies.
8. What is the functions/role of credit rating agencies?
9. What are the main functions of securities broker?
10. What are the functions of deposit and credit guarantee fund?
11. Mention the products and services of credit information bureau of Nepal.
12. List out the important role of deposit and credit guarantee fund.
13. What are the role and functions of CDS and Clearing Ltd?
14. What are the different types of brokers according to the scope of work performed?

CHAPTER 6 : - Primary Markets Operations.

 Important Theory Questions from This Chapter.

1. What are primary markets?
2. What are the roles of primary markets?
3. What is IPO?
4. List out the process of IPO.
5. What is FPO?
6. What are rights offering?
7. Difference between IPO and FPO.
8. What are the methods of issuing securities in primary markets?
9. What is value of rights?
10. Define ex-rights price.
11. Why might a company have a rights offering rather than general cash offer?
12. Explain the legal provision regarding the issue of stocks and debenture in Nepal.
13. Explain the application and allotment process of securities in Nepal.
 CHAPTER 7 : - Secondary Market Operations.

 Important Theory Questions from This Chapter.

1. Define secondary markets.
2. What are the functions of secondary markets?
3. What is stock market index?
4. Define NEPSE and NEPSE Index.
5. Define NEPSE Float Index.
6. What is market order? List out its merits and demerits.
7. Mention the types of order.
8. State how a VWI and PWI are calculated.
9. What are the criteria for selecting a suitable stockbroker? Explain.
10. Discuss the growing use of day trading in online transaction. What are the technical and
service problems associated with online transactions?
11. Explain how the behavior of a stock market average or index can be used to classify
general market condition.
12. What is market capitalization?
13. What is market return?
14. What is PE Ratio?
15. Define Dividend Yield.

CHAPTER 8 : - Financial Regulations and Regulatory Authorities.

 Important Theory Questions from This Chapter.

1. What are the major provisions of NRB/BAFIA/Foreign Exchange Act/Bank offensive
Act/Anti-Money Laundry Act/Insurance Act/Securities Act?
2. Explain the role and power of NRB as a regulator of depository financial institutions.
3. Discuss the functions, duties and powers of insurance board.
4. Explain the regulatory powers of securities Board of Nepal.
5. What are the types of securities business as per the provision of securities Act, 2007?
6. What are the disqualifications for the directors of board of NRB?
7. What is bank supervision?
8. State the provision of Insurance Act regarding the cancellation of license for insurance
agent.
9. What are the activities that are considered as offences under BAFIA?

CHAPTER 9 : - Exchange Rates, Foreign Reserve and Balance of Payment.

 Important Theory Questions from This Chapter.

1. Define foreign reserves.
2. What are the components of foreign reserves?
3. Difference between balance of payments and balance of trade.
4. Draw the structure of balance of payment of Nepal.
5. What is financial account?
6. Discuss the components of financial account.
7. List out the types of exchange rate system.
8. What is foreign direct investment?
9. Define primary income and secondary income.
10. How is the exchange rate between Nepalese Rupee and Foreign Currency determined?
Explain.
11. State the purpose of holding reserve assets.
12. How do you determine net lending or borrowing of the country?
13. What is current account and capital account?
14. Define NOFA.