MECE-004 No.

of Printed Pages : 8
MASTER OF ARTS (Economics)
Term-End Examination
December, 2012
MECE-004 : FINANCIAL INSTITUTIONS
AND MARKETS
Time 3 hours Maximum Marks : 100
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 ?
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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.
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)
Money and near - money.
MECE-004
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MECE-004
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MECE-004
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