Mece-004 Eng

No.
of Printed Pages : 4 MECE-004

1-n
MASTER OF ARTS (ECONOMICS)
Us•-•
'714
Term-End Examination
June, 2018
MECE-004 : FINANCIAL INSTITUTIONS AND
MARKETS
Time : 3 hours Maximum Marks : 100
Note : Attempt questions from each section as per
instructions given.
SECTION - A
Answer any two questions from this section. 2x20=40
1. Discuss the relationship between money supply,
inflation and interest rates using Fisher's
Hypothesis.
2. What is a financial asset ? Explain the three

approaches to the 'risks' associated with financial
assets.
3. Explain the supply of money through the money

multiplier process. What would be the effect of
an increase in money supply on the equilibrium
in money markets ?
4. Explain the Capital Asset Pricing Model (CAPM).

How is the Arbitrage Pricing Theory built upon
the CAPM ?
MECE-004 1 P.T.O.
SECTION - B
Answer any five questions from this section. 5x12=60
5. Explain the nature of options as a derivative.
How does it help in risk management ?
6. Discuss the role of stock markets in the economy.
7. Explain the relationship between Risk and Return

of a portfolio.
8. What is a Customs Union ? How does it work ?

In what way is it different from an Optimum
Currency Area ?
9. What is expected utility function ? What are its

important properties ?
10. Write short notes on :

(a) Functions of Merchant Bank
(b) Futures Markets
11. What are the important links between options and

loans ?
12. Explain the Modigliani Miller Hypothesis.
MECE-004 2
No. of Printed Pages : 4 17IIEE-004 I
MASTER OF ARTS (Economics)

t'r)
December, 2011
MECE-004: FINANCIAL INSTITUTIONS

AND MARKETS
Note : Answer any two questions from section - A and
five questions from section - B.
SECTION - A
Answer any two questions from this section in about
500 words each. 2x20=40
1. Discuss Markowitz's theory of portfolio selection.
Explain how the Capital Asset Pricing Theory
builds upon Markowitz's theory ?
2. Discuss Milton Friedman's Modern Quantity
Theory of Money and compare it with Keynes's
Theory of Demand for Money.
3. Discuss the relationship among money supply,
hypothesis.
4. What do you understand by an Option in a
financial market ? What is the major insight offered
by Black-Scholes's model on option pricing ?
Discuss the assumptions made while deriving the
Black Scholes equation for pricing options.

MECE-004 1 P.T.O.
SECTION - B
Answer any five questions from this section in about

5. Discuss the main functions performed by
investment banks.
6. Explain the nature and significance of money

supply by using the money multipler process.
7. Explain the nature of futures as an important

derivative. How does it help in risk management ?
8. Describe the main role and function of the

International Monetary Fund. How does it differ
in its role and functioning from the World Bank ?
9. Discuss the Efficient Markets Hypothesis.
10. Write short notes on the following :

(a) Value-at-risk (b) Demat of securities
11. What do you understand by the flow-of-funds

matrix of a country ? What are the uses of flow-
of-funds accounting ?
12. Explain the Modigliani-Miller Hypothesis.
MECE-004 2
No. of Printed Pages : 4 MECE-004

December, 2014
MECE-004 : FINANCIAL INSTITUTIONS
AND MARKETS
Note : Answer questions from both parts as per instructions.
PART- A
Attempt any two questions from this part. 2x20=40

1. What are derivatives ? Explain the concept of
options. What distinguishes an American Option
from an European Option ?
2. What is the need for a capital regulator in India ?

Give reasons. Explain the objectives and
functions of SEBI. How far has SEBI been
successful in protecting the interest of investors ?
3. Discuss the relationship among money supply,

hypothesis.
4. Discuss the relative merits of fixed and flexible

exchange rates. Explain the concept of currency
convertibility.
MECE-004 1 P.T.O.
PART - B
Answer any five questions from this part. 5x12=60

supply using the money multiplier process.
6. What are the main functions of a Merchant Bank ?

(a) Credit risk
(b) Demat of securities
8. What are the important links between options and

loans ?
9. Explain the concept of interest rate risk. How is

risk measured in practice ?
10. Explain the loanable fund theory of interest rates.
11. Explain the Modigliani-Miller hypothesis.

In what way is it different from an optimum
currency area ?
MECE-004 2
0 73 1 73 0
No. of Printed Pages : 4 MECE-004 1
December, 2015

AND MARKETS
Note : Answer any two questions from Section A and any

five questions from Section B.
SECTION A
(Long-Answer Questions)
1. Discuss debt and equity as means of raising

finance by a firm. In this context, discuss the
Modigliani-Miller hypothesis.
2. Describe the working of foreign exchange markets.

Discuss the relative merits of fixed and flexible
exchange rates.
3. Discuss Markowitz's portfolio theory of asset

pricing. Critically examine the Efficient Market
Hypothesis. Does it hold true for India ?
4. Analyse the Fisherian hypothesis regarding

interest rates and inflation. In this regard,
examine the Quantity Theory of Money.
MECE-004 1 P.T.O.
SECTION B
(Medium-Length Answer Questions)
5. Discuss the flow-of-funds accounts of a nation and

highlight their significance.
6. What is a commodity futures market ? Explain

the functioning of such a market.
7. What is an expected utility function ? What

properties does an expected utility function
have ?
8. Explain the nature of 'futures' as an important

derivative. How does a 'futures' help in risk
management ?

As an asset, how does a bond differ from a
share ?
10. What are the main functions performed by an

Investment Bank ?
11. Explain the Loanable Funds Theory of interest

rates.
12. Describe the main functions and role of the

International Monetary Fund (IMF). How does it
differ in its role and functioning from the World .
Bank ?
MECE-004 2

C\I Term-End Examination
June, 2014
t-r) MECE-004 : FINANCIAL INSTITUTIONS
AND MARKETS
Note : Answer questions from both the parts as per instructions.
PART- A
Attempt any two questions from this part. 2x20=40

an increase in money supply on equilibrium in
money markets ?

approaches to the risks associated with financial
assets.
3. Describe the flow of funds matrix in an economy.

Mention the uses of flow of funds accounting.

Theory of Money. Compare it with the Keynes's
Theory of Demand for Money.
MECE-004 1 P.T.O.
PART- B
5. How does a custom union functions ? How is it

different from an optimum currency area ?
6. What are the major instruments of monetary

policy in India ? Explain.
7. Discuss the role of stock markets in an economy.
8. Distinguish among Markov expectations,

adaptive expectations and rational expectations.
9. Explain how the logistic regression model can be

used in credit risk analysis.

(a) Demat of Securities
(b) Functions of Merchant Bank
11. Discuss the role and functions of SEBI (Securities

and Exchange Board of India).
12. What is expected utility function ? What are the

important properties of an expected utility
function ?
MECE-004 2
01046 June, 2015
AND MARKETS
instructions given.
SECTION A
(Long Answer Questions)
1. What are the main components of a financial

system ? What are the functions of a financial
system in the process of economic development ?
2. Explain the Capital Asset Pricing Model
(CAPM). How does Arbitrage Pricing Theory build
upon the CAPM ?
3. What do you understand by an option in a
financial market ? What are the major insights
offered by Black-Scholes model on options
pricing ? Discuss the assumptions made while
deriving the Black-Scholes equations for pricing
Options.
4. Explain how expected utility is used in
decision-making under uncertainty. What do you
understand by risk-aversion ?
MECE-004 P.T.O.
SECTION B
(Medium-Length Answer Questions)
Answer any five questions from this section. 5x12p601
5. Explain the Macaulay Duration Model of risk

management. How can a bond trader use the
Macaulay Duration Model in trading ?
. Examine the Keynesian theory of the

determination of interest rates.
7. Distinguish between a futures contract and a

forward contract. Briefly explain the binomial
options pricing model.
8. What are the main functions of a Merchant Bank ?
9. Explain how do banks create money by giving

loans. Is there any limitation on banks to create
credit ?
10. Discuss the role and functions of Securities and

Exchange Board of India (SEBI).
11. Examine the need for and the role of depository

system in secondary financial markets.
12. What is a Customs Union ? How does it work ? In

what way is it different from an Optimum
Currency Area ?
MECE-004 2
No. of Printed Pages : 4 I MECE-0041
fin MASTER OF ARTS (ECONOMICS)
tf4-)
June, 2016
MARKETS

Note : Attempt questions from both sections as per
instructions.
SECTION - A
Attempt any two questions from this section :
2x20=40
1. What does a flow-of-funds matrix for an economy
show ? What are the uses and significance of
flow-of-funds accounts ?
2. Explain the Capital Asset Pricing Model. How

does the Arbitrage Pricing Theory build upon the
Capital Asset Pricing Model ?

finance by firms in the capital market. In this
context, discuss the Modigliani Miller hypothesis.

Theory of Money and compare it with Keynes's
theory of Demand for Money.
MECE-004 1 P.T.O.
SECTION - B
Answer any five questions from this section :
5x12=60
5. Explain the nature of options as a derivative.
How does it help in risk management ?
6. What are the main functions of a Merchant

Bank ?
7. What is an expected utility function ? What are

the important properties that an expected utility
function has ?

supply using the money multiplier process.
9. What is the role of stock markets in the economy ?

As assets, how do bonds differ from stocks ?
10. What do you understand by 'duration' as used in

the analysis of fixed income securities ? In what
way is the so-called 'modified' duration measure
a modification of the Macaulay measure ?
11. Discuss the main achievements and failures of the

Bretton Woods Institutions.
12. Examine the case for government regulation of

financial markets. Do you think the government
should regulate commercial banks ? Give reasons
for your answer.
MECE-004 2
June, 2011
O
AND MARKETS

Note : Answer any two questions from section - A and
five questions from section - B.
SECTION - A
Answer any two questions from this section in about
1. Critically examine the Quantity Theory of money.

Discuss the Fisher hypothesis regarding interest
and inflation.

How does the Arbitrage Pricing Theory build
upon the CAPM ?

finance in the capital market. In this context,
discuss the Modig Liani-Miller-hypothesis.

exchange rate systems. Explain the concept of
currency convertibility.
MECE-004 1 P.T.O.
SECTION - B
Answer any five questions from this section in about
5. Discuss the main functions of a Merchant bank.
6. What do you understand by 'duration as used in

the analysis of fixed-income securities ? In what
way is the so called 'modified' duration measures
a modification of the Macaulay measure ?
7. Describe the flow-of-funds accounts of a nation

and discuss their significance.
8. Discuss the role and functions of Securities and

Exchange Board of India (SEBI).
9. Explain how have volatility in the Indian markets

changed after introduction of derivatives trading.
10. Explain the role of arbitraguers and speculators

in a futures market. What type of risks do they
face and how can they minimise these risks ?
11. What is a Custom Union ? How does it work ?

In what way is it different from an optimum
currency area ?
12. What is an expected utility function ? What are

the important properties of an expected utility
function ?
MECE-004 2

7t, December, 2018
MARKETS

instructions gizien.
SECTION - A
finance in the capital market. In this context,
discuss Modigliani Miller hypothesis.
2. Explain how expected utility is used in decision

making under uncertainty. What do you
understand by risk oversion ?
3. What is the need for a capital regulator in India ?

Give reasons. Explain the objectives and functions
of SEBI. How far has SEBI been successful in
protecting the interest of investors ?

MECE-004 1 P.T.O.
SECTION - B

In what way it is different from optimum
currency area ?

supply in using the Money Multiplier Process.

(a) Demat of securities
(b) Value-at-risk
9. Describe the main functions and role of the

International Monetory Fund. How does it differ
in its role and functioning from the World
Bank ?
10. Explain the loanable funds theory of interest rates.
11. What is expected utility function ? What are the

important properties of expected utility
function ?
12. What is leverage ? How does a firm usin.g leverage

benefit from it ?
MECE-004 2

December, 2017
MARKETS
Note : Attempt questions from each sections as per instructions.
SECTION - A
2x20=40
1. Describe and compare the binomial model and
the Black Scholes formulation of derivative
pricing.
2. What is the need for capital regulator in India ?

3. Critically examine the Quantity theory of money.

Discuss the Fisher hypothesis regarding interest
and inflation.
4. What are derivatives ? Explain the concepts of

options. What distinguishes an European option
from an American option ?
MECE-004 1 P.T.O.
SECTION - B
Answer any 5 questions from this section : 5x12=60
5. What is meant by currency convertibility ? What

is the importance of current account
convertibility ?
6. Explain the Arbitrage Pricing theory.
7. Explain the functions of RBI. How does RBI

control credit creation by commercial banks ?
8. What is a custom union ? How does it work ? In

what way is it different from an optimum
currency area ?
9. Distinguish among Markov expectation, adoptive

expectations and rational expectations.
10. Critically assess the suitability of Linear -

Probability model in the credit risk analysis.
11. Discuss the main functions of a Merchant Bank.
12. Point out the differences between swaps, futures

and forward contracts. Under what conditions
swaps can be used.
MECE-004 2

December, 2012

AND MARKETS
Time 3 hours Maximum Marks : 100
Note : Answer questions from each section as per instructions.
SECTION-A
(Long answer questions)
1. Describe Markowitz's portfolio theory. Explain

how the Arbitrage Pricing Theory is different from
Markowitz's theory and the Capital Asset Pricing
Model.
2. What do you understand by the yield curve and

by the term - structure of interest rates? Describe
the expectations hypothesis, the market -
segmentation hypothesis, and the preferred
habitat theory as explanations of the term
structure of interest rates.
MECE-004 1 P.T.O.
in money markets ?
4. What is the need for a capital regulator in India?

MECE-004 2
SECTION - B
(Medium - length - Answer Questions)
Answer any five questions from this section.
5x12=60
5. Explain the concept of a derivative. List the
various functions of derivative markets.
6. Describe how ex-post return and average return

on a security is calculated. What is the basic
measure of ex - post risk?
7. Distinguish among Markov expectations,

adaptive expectations and rational expectations.
9. Explain the Fisherian hypothesis about the

relationship between interest rate and inflation.
10. Critically assess the suitability of the Linear

Probability - Model in the analysis of credit risk.
11. Explain what an optimum currency area means.

How does it work ?
12. Distinguish between any three of the following :

(a) Current yield and yield to maturity
(b) Banks and non-bank financial inter
mediaries.
(c) Yield of a bond and return of a bond.
(d) Money and near - money.
MECE-004 3 P.T.O.

00 Term-End Examination
cc December, 2013
c\1 MECE-004 : FINANCIAL INSTITUTIONS
O AND MARKETS
Note : Answer questions from both the parts as per instructed.
PART- A
Answer any two questions from this part : 2x20=40
finance in the capital market. In this context
discuss the Modigliani-Miller hypothesis.
2. Explain Black-Scholes formula for pricing a

financial instrument.
3. Explain the role of deposit insurance in protecting

interests of the depositors. What role is played by
financial intermediation in the conduct of
monetary policy ?
4. What is the importance of duration in the analysis

of 'fixed income securities' ? Explain the modified
duration measures in this context.
PART- B
5x12=60
Answer any five questions from this part :
5. Explain the relationship between Risk and Return
of a portfolio.
MECE-004 1 P.T.O.
6. Explain the expected utility hypothesis.
8. What are the advantages'of flexible exchange rates

over the fixed ones ?
9. Explain the Linear Probability Models of

estimating the risk of default.
10. Briefly explain J. P. Morgan's idea of credit metrics.
11. What are the major instruments of monetary

policy in India ? Explain.
12. What are the main intermediaries in the primary

market in India ? Explain.
MECE-004 2

*0.4
•••••=11 December, 2016
MARKETS
Note : Attempt questions from both sections as per instructions.
SECTION - A
2x20=40
1. What are the main components of a financial
system ? What are the functions of a financial
system in the process of economic development ?
2. Discuss Markowitz's portfolio theory of asset

pricing. Explain how the Capital Asset Pricing
Theory builds on Markowitz's theory.
3. Discuss the Quantity Theory of Money. Discuss

the Fisher hypothesis regarding interest and
inflation.
4. Describe the ways in which companies raise

finance. Discus the main issues regarding the
capital structure of firms.
MECE-004 1 P.T.O.
SECTION - B
Attempt any five questions from this section :
5x12=60
5. Describe the structure of foreign exchange
markets. Explain the difference between spot and
forward exchange rates.
6. Critically examine the Linear Probability Model

as used in the analysis of credit risk.
7. Explain the role of arbitrageurs and speculators

in a futures market. What types of risks do they
face and how can they minimise these risks ?
8. What are the main functions performed by an

investment bank ?
9. Discuss the role and functions of the Securities _

and Exchange Board of India (SEBI).
10. Explain the Loanable Funds theory of interest

rates.
11. Discuss the Efficient Market hypothesis.
12. Derive a relationship between the monetary base

and monetary aggregates.
MECE-004
June, 2012 00952
AND MARKETS

Note : Answer questions from each section as per instructions.
SECTION-A
(Long answer questions)
1. What do you understand by a financial system ?
Discuss the functions that are performed by a
financial system in the process of economic
growth.
2. Describe the flow-of-funds matrix of an economy.

Mention the uses of flow-of-funds accounting.
3. Explain how expected utility is used in decision

making under uncertainty ? What do you
understand by risk aversion ?
4. Describe and compare the binomial model and

the Black-Scholes formulation of derivative
pricing.
MECE-004 1 P.T.O.
SECTION-B
(Medium-length answer questions)
5. What is merchant banking ? Describe the
functions of a merchant bank.
6. What is a bank panic ? How does it occur ? How
can it affect even otherwise healthy banks ?
7. What are the differences between futures and
forward contract ? Explain the nature of futures
as an important derivative. How do futures help
in risk management ?
8. Explain :
(a) The Keynesian theory of demand for money.
(b) Liquidity preference theory of interest.
9. What are the functions of the Central Bank of a
Country ? What are the instruments at the
disposal of the Reserve Bank of India to conduct
monetary policy ?
10. Explain how the logistic regression model (logit
model) can be used in credit risk analysis ?
11. What do you understand by customs union and
a free trade area ? Bring out the difference
between them.
12. What do you understand by :
(a) Oversubscription of IPOs
(b) Underpricing of IPOs ?
MECE-004

June, 2013
c\1
AND MARKETS
Note : Answer questions from both the parts as per instructions.
PART- A
Attempt any two questions from this part : 2x20=40
approaches to the 'risks' associated with financial
assets.
2. What are derivatives ? Explain the concepts of

'options'. What distinguishes an American option
from a European option ?
3. What are the publicity traded financial assets ?

How does Moody's KMV approach estimate asset
value and volatility ? How does it reconcile the
Expected Default Frequency and Actual Default
Frequency ?
4. Explain Fisher's hypothesis regarding Money,

Interest and Inflation. Also evaluate the evidence
that emerges from India in this regard.
MECE-004 1 P.T.O.
PART - B
5. Explain the Arbitrage Pricing Theory.
6. What do you mean by currency convertibility ?

What is the importance of current account
convertibility ?
7. What are the functions of a Central Bank ? How

does it control credit creation by Commercial
Banks ?
8. What is leverage ? How does a firm using leverage

benefit from it ?
9. Explain the main features of secondary market

structure in India. Which are the principal
institutions operating in it ?
10. How does a customs union functions ? Is it

different from an optimum currency area ?
11. Explain decision making under uncertainty. What

are the features of a utility function under
uncertainty ?
12. What do you mean by initial public offering ?

What are its costs ?
MECE-004 2

o
Co
June, 2017
MARKETS

Note : Attempt questions from each section as per instructions
given.
SECTION - A
Answer any 2 questions from this section. 2x20=40
1. Discuss Friedman's Modern Quantity Theory of
Money and compare it with Theory of Demand
for money of Keynes.

in money markets ?
3. What is a financial asset ? Explain three

approaches to the Risks associated with the
financial assets.

MECE-004 1 P.T.O.
SECTION - B
Answer any 5 questions from this section : 5x12=60

6. What is a commodity future market ? Explain

the functioning of such a market.
7. Examine the need and role of depositary system

in secondary financial markets.
8. Describe how ex-post return and average return

on a security is calculated. What is the basic
measure of ex-post risk ?
9. Discuss the role of stock-markets in an economy.
10. What do you understand by customs union and

free trade area ? Explain the differences between
the two.
11. Explain what do you mean by public offering ?

What are its costs ?
12. Distinguish between :

(a) Yield of a bond and return of a bond
(b) Money and near-money
(c) Current yield and yield to maturity.
MECE-004 2

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of Printed Pages : 4 MECE-004

2. What is a financial asset ? Explain the three

3. Explain the supply of money through the money

4. Explain the Capital Asset Pricing Model (CAPM).

6. Discuss the role of stock markets in the economy.

7. Explain the relationship between Risk and Return

8. What is a Customs Union ? How does it work ?

9. What is expected utility function ? What are its

10. Write short notes on :

11. What are the important links between options and

12. Explain the Modigliani Miller Hypothesis.

MASTER OF ARTS (Economics)

MECE-004: FINANCIAL INSTITUTIONS

Answer any five questions from this section in about

6. Explain the nature and significance of money

7. Explain the nature of futures as an important

8. Describe the main role and function of the

9. Discuss the Efficient Markets Hypothesis.

10. Write short notes on the following :

11. What do you understand by the flow-of-funds

12. Explain the Modigliani-Miller Hypothesis.

MASTER OF ARTS (Economics)

Note : Answer questions from both parts as per instructions.

Attempt any two questions from this part. 2x20=40

2. What is the need for a capital regulator in India ?

3. Discuss the relationship among money supply,

4. Discuss the relative merits of fixed and flexible

Answer any five questions from this part. 5x12=60

6. What are the main functions of a Merchant Bank ?

7. Write short notes on :

8. What are the important links between options and

9. Explain the concept of interest rate risk. How is

10. Explain the loanable fund theory of interest rates.

11. Explain the Modigliani-Miller hypothesis.

12. What is a Customs Union ? How does it work ?

MECE-004 : FINANCIAL INSTITUTIONS

Note : Answer any two questions from Section A and any

1. Discuss debt and equity as means of raising

2. Describe the working of foreign exchange markets.

3. Discuss Markowitz's portfolio theory of asset

4. Analyse the Fisherian hypothesis regarding

Answer any five questions from this section. 5x12=60

5. Discuss the flow-of-funds accounts of a nation and

6. What is a commodity futures market ? Explain

7. What is an expected utility function ? What

8. Explain the nature of 'futures' as an important

9. Discuss the role of stock markets in the economy.

10. What are the main functions performed by an

11. Explain the Loanable Funds Theory of interest

12. Describe the main functions and role of the

MASTER OF ARTS (Economics)

Note : Answer questions from both the parts as per instructions.

Attempt any two questions from this part. 2x20=40

1. Explain the supply of money through the money

2. What is a financial asset ? Explain the three

3. Describe the flow of funds matrix in an economy.

4. Discuss Milton Friedman's Modern Quantity

Answer any five questions from this part. 5x12=60