Work on the following tutors;
(i) List the main investor classes. [2] (ii) Outline the role and services of investment banking firms in raising money for businesses. [4] [Total 6] 2 Describe the expected three pillars and the main rationales of the Basel II Accord. [6] 3 Assume that banks lend to companies at the inter-bank rate plus a fixed margin. Twelve months ago ABC Co. borrowed 20m from XYZ Bank at a fixed margin of 2% per annum. ABC Co. now wishes to borrow an additional 20m. XYZ Bank has offered to lend the money at a fixed margin of 3% per annum. (i) Describe two features of the new loan which may have caused XYZ Bank to offer the new loan at a higher fixed margin. [2] (ii) Describe two factors specific to ABC Co. which may have caused XYZ Bank to offer the new loan at a higher fixed margin. [2] (iii) Describe two factors specific to XYZ Bank which may have caused XYZ Bank to offer the new loan at a higher fixed margin. [2]A group of shareholders has Written to the hoard of directors of a companyr complaining that executives are being paid an excessive amount of compensation in the form of options on the company's stock, and that diese are not aligning management's interests with those of shareholders. Explain how the granting of share options may cause the interests of the two groups to diverge. [] An investment companyr is proposing to launch a new product which will allocate funds to a selection of hedge fund managers. State the main factors that the investment company should consider when selecting hedge fund managers for inclusion in the product. [IS] 6 You work for a company that measures the performance of a number of investment funds and publishes the results for your clients. The managing director has noticed that no one is regularly assessing the risk adjusted performance of project finance funds. A project finance fund is a fund which provides debt capital to capital projects. (i) Outline the various difficulties associated with analysing the risk adjusted performance of project finance funds. [3] (ii) Suggest a possible approach for measuring this performance. [2] (iii) Describe the data which you would require for your approach. [3] [Total 8] 7 (i) State the primary function of a credit rating agency. [1] (ii) Describe the operation of a typical credit rating agency. Your answer should include reference to the sources of revenue, internal operations and delivery of services. [5] [Total 6]{i} [ii] {iii} {ii} {iii} Describe what is meant by r*'vt-rorlting capital\". [1] State with reasons an example of a type of company which is likely to have relatively low working capital and another example of a type of company that is likely to have relatively high working capital. [4] Outline four actions that a company might take to try to reduce its working capital requirement. [4] [Total 9] I.C.'Iutline the main points to consider when deciding what security to accept against a loan. [2] Explain whether the following are appropriate security for the given loan: [3] (a) property valued at 12Illm as security for a Ill-year arnortising 1 m loan; and (b) new cars costing 12m as security for a Eayear Elm RPI index- linked loan where the loan is repaid in full aer Ell] years. Apart from security, outline the other main factors to consider prior to making a loan. [5]
