University of Strathclyde

Department of Accounting and Finance

M.Sc. Finance OL Tanzania

Students Name: ULIMBAGA GODWIN MWAKALIBULE

Intake [18th Full Time]

Registration Number: B 3517/1 201284224

Class Code: 40908

Assignment: Financial Markets and Institutions

Lecturer in Charge: Dr. Suleiman R. Mohamed

Date of submission: 4pm Monday 28th May, 2012

DECLARATION

This assignment is submitted in partial fulfillment of the requirements for the Degree in

Masters of Finance at the University of Strathclyde, and accords with the University

Regulations for the programme as detailed in the University Calendar.

I declare that this assignment embodies the results of my own work and that it has been

composed by me. Following normal academic conventions, I have made due

acknowledgement of the work of the others.

U. G. Mwakalibule Date: Monday 28th May 2012.

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1. Carry out an in-depth analysis of the DSE and LSE and report on the problems that they
may face from now to year 2020. Specifically, you should review their history, the trading
system (past and present), the main financial institutions that operate on them and the
largest companies that are traded on the two respective exchanges. Assess the role of
regulation on the efficiency of the markets and the way that the activities of financial
intermediaries have evolved to accommodate changes in the legal constraints placed on
them.
(20 Marks)

2. Financial intermediaries are regarded to play a very important role in the economy.
Discuss the importance of financial intermediaries in today’s economy.
(10 Marks)

3. Define the terms “surplus spending unit” and “deficit spending unit” and explain why
economic units may or may not become one or the other. Finally, discuss and explain
why some economic units are more likely IN GENERAL to be SSUs and others are more
likely to be DSUs.
(10 Marks)

4. a) Define the following terms related to underwriting:

i. Firm commitment
ii. Best efforts
iii. Syndicate
iv. Spread
b) Explain the factors pertaining to a decision on whether or not to adopt a best efforts
or firm commitment underwriting agreement from both an investment bank’s
perspective and the issuing company’s perspective.
(14 Marks)

6. Review the objectives of a venture capitalist. From a venture capitalist’s perspective,

what would be the main source of risks in small firms? What control mechanisms or
contracts should a venture capital firm put into place to ensure that the fledgling
company is well run and performs as well as possible in the future?
(10 Marks)

7. Review the similarities and differences between investment and commercial banks.
Many commercial banks and investment houses have begun to compete with investment
banks for underwriting business. Explain why this may or may not be a good thing for
the issuing company and for investors.
(10 Marks)

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8. Discuss the genesis of the 2008-09 global financial crisis. Assess the contribution of
inadequate regulatory systems and banking supervision for the crisis. Suggest ways of
ow to avert such economic disasters in the future.
(10 Marks)

(TOTAL 100 MARKS)

1. Explain carefully the meaning of the following terms:

a) Capital Markets
b) Financial Markets
c) Money Markets
d) Primary Markets
e) Secondary Markets
f) Foreign Exchange Markets
g) Equity Markets, and
h) Derivative Markets
(16 Marks)