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Department of Accounting and Finance

M.Sc. Finance
M.Sc. Investment and Finance
M.Sc. International Banking and Finance
M.Sc. International Accounting and Finance
M.Sc. Finance and Management
and
M.Sc. Quantitative Finance

AG912: International Financial Markets and Banking

MAIN EXAM
14 December 2022 10.30am – 1.30pm (3 hours)
Instructions for Candidates – Please Read Carefully
Answer ALL Questions from Section A (in the answer grid provided)
And TWO Questions from Section B (in the answer book provided)
1. Financial calculators are not allowed.
2. Calculators must not be used to store text and/or formulae nor be capable of communication.
Invigilators may require calculators to be reset.
3. All answers are to be written in ink.
4. If you make use of more than answer book note this on the front of the script, ie. book 1 of … book 2
of … etc.
5. This question paper is to be returned along with your examination answer booklet, you should
complete the above and slip this paper into your answer booklet. Under no circumstances is a copy of
this paper to leave the exam room.
6. Failure to follow these requirements will lead to a deduction of marks.

To Be Completed by Student (please write clearly)

Registration Number 2022

Course (please indicate by ticking appropriate box)
Finance Invest & Fin. Banking & Fin Accounting & Fin
Quantitative Fin. Finance & Management

Please Note: This question paper is to be returned along with your

examination answer booklet, you should complete the above and slip this
paper into your answer booklet. Under no circumstances is a copy of this
paper to leave the exam room.

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Department of Accounting and Finance

AG912: International Financial Markets and Banking
14 December 2022 10.30am – 1.30pm (3 hours)

MULTIPLE CHOICE ANSWER SHEET

To Be Completed by Student (please write clearly)
Registration Number 2022
If you are unable to enter you student registration number then include your name below, but note this
cancels your right to anonymous marking.
Surname

Forename
Course (please indicate by ticking appropriate box)
Finance Invest & Fin. Banking & Fin Accounting & Fin
Quantitative Fin. Finance & Management

Indicate your answer by inserting a cross the correct box below for each question
A B C D
Q1.
Q2.
Q3.
Q4.
Q5.
Q6.
Q7.
Q8.
Q9.
Q10.
Q11.
Q12.
Q13.
Q14.
Q15.

Total /30

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Section A
Answer ALL Questions
Q1. The UK introduced legislation that…

A. prohibits universal banks

B. requires all banks to be universal banks
C. requires ring-fencing of retail banking activities
D. prohibits ring-fencing of retail banking activities
(2 marks)
Q2. The theory which considers the change in the exchange rate between two currencies with
fluctuations in their respective inflation rates and interest rates is known as:

A. Fisher Effect
B. relative purchasing power parity
C. relative selling power parity
D. absolute purchasing power parity
(2 marks)
Q3. In a financial context “Retrocession” is:

A. a type of insurance wherein a reinsurance company takes on part of the risk assumed by
another reinsurance company
B. is a type of insurance wherein a bank takes on part of the risk assumed by another bank
C. is a type of insurance wherein an insurance company takes on part of the exchange rate risk
faced by a company
D. the opposite of a recession

(2 marks)
Q4. The money market deals with borrowing of

A. exactly 1 year
B. more than 2 years
C. less than 1 year
D. up to 6 month
(2 marks)
Q5. Which statement is true? UK bonds....

A. have a face value of £100

B. cannot be callable
C. have to pay a coupon
D. have a face value of £1,000
(2 marks)

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Q6. Preferred habitat theory, expectations theory, and market segmentation theory are theories to
describe:

A. term structure of interest rates

B. term structure of inflation
C. term structure of insurance premiums
D. term structure of segmentation

(2 marks)
Q7. The Prudential Regulatory Authority (PRA) has responsibility for prudential regulation of…

A. all UK financial institutions

B. the smallest UK financial institutions
C. the largest UK financial institutions
D. all building societies

(2 marks)
Q8. A market without financial intermediaries is characterised by ….

A. direct financing
B. indirect financing
C. minimal search costs
D. low verification costs

(2 marks)
Q9. Which one of the following is a function of the Financial Conduct Authority (FCA}?

A. setting exchange rates

B. regulating the conduct of banks
C. setting UK tax rates
D. setting interest rates
(2 marks)
Q10. The rule which states that a similar set of goods and services produced in various countries should
have equal price is known as:

A. law of similar mortgage rate

B. law of one type manufacturing
C. law of similar labour rules
D. law of one price

(2 marks)

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Q11. The form of market efficiency which considers the speed and accuracy with which information is
incorporated into security prices is called:

A. allocative efficiency
B. informational efficiency
C. operational efficiency
D. expensive market efficiency

(2 marks)
Q12. Credit rating agencies when rating corporate bonds are paid for their services by:

A. the government
B. the bond issuer
C. the SEC
D. the bond buyers
(2 marks)
Q13. Which of the following is not a test of the semi-strong form of the Efficient Market Hypothesis
(EMH)?

A. stock reaction to merger announcements

B. tests of serial correlation in stock returns
C. stock price reactions to the announcement of stock splits
D. tests of the performance of mutual funds

(2 marks)
Q14. A currency that is distributed, open-source, math-based, peer-to-peer, virtual, with no central
administrating authority, and no central monitoring or oversight is known as a:

A. non-convertible currency
B. virtual currency
C. crypto-currency
D. fiat currency

(2 marks)
Q15. A country in a Currency Board has…
A. no discretionary monetary policy
B. discretionary monetary policy
C. no currency reserves
D. no banknotes
(2 marks)
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Section B
Answer TWO Questions

Q1. Evaluate the reasons typically given for heavy regulation of financial markets and institutions,
comment in particular on those given by Llewellyn (1999). Outline the framework for financial
regulation in the UK, as set out by the Financial Services Act 2012. Comment on any potential issues
with this new set-up and developments since then.
(35 MARKS)

Q2. Explain the concept of riba in Islamic Finance. Explain two ways in which a mortgage may be
structured to comply with the rules of Islamic Finance.
(35 MARKS)

Q3. Why are secondary markets important for the economy? Compare and contrast order-driven and
quote-driven equity markets and explain the mechanisms for trading equities on the LSE and for UK
gilts respectively.
(35 MARKS)

End of Paper

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