QUESTION 1

A security is a tradable financial asset and refers to any form of financial instrument. In some jurisdictions it includes some instruments that are close to equities and fixed income, such as equity warrants, debentures, government and public securities, rights to or interests in investments. Securities are broadly categorized into debt securities (like banknotes, bonds and debentures), equity securities (such as common stocks) and derivatives such as forwards, futures, options and swaps.

1. Discuss the reasons merchant banks or investment banks are in the business of selling, buying or subscribing to securities. Give any such examples as may prevail in Zambia. (5 marks)
2. Why do investors truthfully reveal their interest in an offering to the investment banker? (5 marks)
3. Explain the importance of the steps in a pre & post issue management. [10 marks]
4. Describe 4 main functions performed by merchant banks in Zambia
5. Briefly outline 2 risks managed by financiers in syndicated facilities.
6. Briefly examine 4 main risks and remedial ways on how they could be minimized by merchant/investment bankers.
7. Describe the impact these risks: reputation and credit risks; have on the activities of CMBs

8. Stocks and bonds play different roles in investors portfolios beyond generating capital gains, dividends and interest income. These two classes of assets have their own pros and cons. It is important for investors of these assets to familiarise themselves with them so that they can make more informed decisions about what is right for them and their businesses as they make investment decision. i). What are stocks and bonds to an investor? ii) Outline in detail the advantages and disadvantages of the two assets that an investor must be concern with as their investment vehicles. iii). Explain why it is important for investors to familiarise themselves with these two classes of assets before they invest into them.