Answer ALL questions .Marks allocated to each question are shown at the end of the question.

Show ALL
your workings.
QUESTION ONE
(a)With reference to corporate lending, explain the following terms:
(i)Credit derivatives (2marks)
(ii)Loan review (2marks)
(b)Highlight eight indicators of inadequate or poor lending policies. (8marks)
(c)Contrast between the following set of terms
(i)Evergreen loan and term loan. (4marks)
(ii)Over advances and permanent working capital loan. (4marks)
(Total:20Marks)

QUESTION TWO
(a)Outline four reasons why sovereign borrow from lenders. (4marks)
(b)Evaluate three sources of post lending information and its relevance in reviewing the borrowers
financial affairs. (6marks)
(c)Discuss five factors that bank should take into account before accepting a security from a corporate
borrower. (10marks)

(Total:20Marks)

QUESTION THREE
(a)In relation to corporate lending,explain Basel Accord II. (2marks)
(b)Evaluate four factors that influence the growth and mix of loans held by a bank.(4marks)
(c)iExplain the term” Performance budgeting”.(2marks)
(iiDescribe four characteristics of performance budgeting.(4marks)
(d)Evaluate the parameters that are considered foreach of the aggregated microprudential indicators
listed below in assessing the soundness of financial institutions.
(i)Capital Adequacy (2marks)
(ii)Asset quality (2marks)
(iii)Management soundness (2marks)
(iv)Earnings and profitability. (2marks)
(Total:20Marks)

QUESTION FOUR
(a)Explain the following terms:
(i)Accounts receivable advance rates (2marks)
(ii)Inventory advance rates. (2marks)

(b)Calculate the net present value (NPV) of a bond with aface value of sh.1,000 ,coupon rate of 8% and
maturity period of 3 years.The yield to maturity is 10%. (2marks)
(c)Systematic risks are caused by external and uncontrollable factors arising out of the market,type the
industry and the state of the economy.
With reference to the above statement,discuss three types of systematic risks to a business entity. (6
marks)
(d)Discuss a company's obligation for the secured credit facility. (8marks)
(Total:20marks)

QUESTION FIVE
(a)Analyse six bond value theorems. (6marks)
(b)Discuss the guidelines that should be incorporated in an ethics strategy of an organization.(6 marks)
(c)Summmarise eight internal variables that should be considered in evaluating corporate performance.
(8 marks)
(Total:20 marks)