No. of Printed Pages : 8

MECE-004

MASTER OF ARTS (Economics) Term-End Examination December, 2012 MECE-004 : FINANCIAL INSTITUTIONS AND MARKETS Maximum Marks : 100

Time 3 hours

Note : Answer questions from each section as per instructions.

SECTION-A (Long answer questions) Answer any two questions from this section. 2x20=40 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.

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.

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

2

SECTION - B (Medium - length - Answer Questions) Answer any five questions from this section.

5.

5x12=60 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.

8.

Discuss the role of stock markets in the economy.

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)

MECE-004

Money and near - money.

3

P.T.O.

74.1.1:11.1.-004 I 3TOTTPX)

chtell

TNIT

1

kMzif, 2012 1f.1..1.-004. fd911:1 T/772/ :

3

"0 ezi

Eiu

317fEWUr7

712- : 37rgz c

drH

37T 100

Pfq-Tviv/K

taus -3T (tEfz911-474.9. ) (g* 1.

&7)• .5r7t

ft:r4t .11

4-114)

1

dTit

10111-1

tf44

2x20=40 -14-1*-ti

T1-1:17 f9IthuT ftcrZfd (Arbitrage Pricing

Theory) f

4r-14-4F-cl

(Capital Asset Pricing Model)

f9.4177 Hiso Vag 1 ffiZiff

firr?r t 2.

-5rit asb -4 AT -Wr7 711 1-24r

q4 ? Trr-a-Ferw-e-

.T4 Acr 1-611

4Rchc411

fiTzt MECE-004

3-1-51771 -9-ff-q1(4

ct>") ..e4Rsql

5

P.T.O.

3.

4I 'TT -5(W:111 t gR1 +Al c1;1- 3,-,:e c w„i,,, I i„, r azrr 1Prid 07 1T 4A5,I 3Trce if ttil:Illt 14#g"tr*IT ?

4.

1-1R7 4 14, Aci41:11R '4 rcii-N1Hc4 (regulator) chl qzff 3T-47z1-*71t. ? 3174 37It t 11101 ff'fR ► I4R44 FOP rcil-N4-1 * (1')-- ) t 01-11 AFT . 2,T1 chl4 ► *1-0 4)4 Oct) f1 ktchl* icil --r #Tki-ur c:4 if -wi. -ter t ?

MECE-004

6

tgUS (17Wri Nu5 414

5.

U"1 )

ftt trila

1-0:r5r

aTawurrT). Tcrtz 1F . -44 I -ale:m.

fgrim

.wr-A-4

I

5x12+60

-) Tif-difff -ER IR.cifzich urcitoo -ffgr aftrff TAT9

6.

mcw

rchql AlCif

t,

0611tc3441

317 Trittt t ?

a itcl f amgt

7.

tr.—A

311(

1744, arffffitF P-TT cici)wIti (rational)ic-ttiq113-ff t

31"-d7 WIF74 I

8.

342i-aPT-21114 it

9.

6411\1*241.

lifTrwr

.1,41 --1-F-A-4 I

Tci di 4114 44%1* 011

4 frF7R

mI4cbc-9-11 tizrl:rejq-4

10. TITUW751:1 iqc;iuf ind7:1-149.TrardT4-iiso*

airF149-F-rrw MECE-004

d(ATticii

wl-r-4- 4 I 7

P.T.O.

11.

TizrEz ---lf471

fT

-q. ;Er T

iLz--d-rr 411

12. fw--

d 1 -k .11-4 31-th --tfq--4

(a)

-clIci lirti 741 4rt 4c1-1(11

t

1

f--*-Tr .5r-*-R

(b) ti-T -d1T t- ;ch fdtzt -RV:Fa (c) WZI- (bond) ch1 Stifii 4R -3- It cr-ho (d) +11 2,TT kir;icbd +V (near money)

MECE-004

8