FINANCIAL MANAGEMENT 1 (BBPW3103)

ASSIGNMENT 1 & 2
MAY SEMESTER 2021
NAME : FRESHLY JONAL
MATRIC NUMBER : 930614126347
DUE DATE : 12 JULY 2021
 TABLE OF CONTENTS

NO. CONTENTS PAGES

1.0 ASSIGNMENT 1 1

1.1 Definition of money market and capital market 1

1.2 Function and roles of money markets and capital 2

markets can influence the financial markets in

Malaysia

1.3 Conclusion 4
2.0 ASSIGNMENT 2 5

2.1 Introduction to three selected commercial banks 5

2.2 Calculation of three commercial banks future value 9

annuity

2.3 Comparison of the total savings between the three 13

commercial banks

2.4 Conclusion 14
REFERENCES 15
1.0 ASSIGNMENT 1

Financial markets are marketplaces where buyers and sellers may exchange financial

assets such as stocks, bonds, commodities, derivatives, and currencies. The purpose of

financial markets is to establish global trade prices, raise money, and transfer liquidity and

risk. In the financial market, there are two frequently utilized components, namely the money

market and the capital market.

1.1 DEFINITION

Money market

As for the first one, modern economy requires a well-developed money

market. Although the money market has traditionally evolved as a consequence of

industrial and commercial advancement, it also plays an essential part in a country's

industrialisation and economic growth. The money market is an organized exchange

market in which players lend and borrow short-term assets having maturities of one

year or less. Short-term securities include Treasury bills, certificates of deposit,

commercial paper, banker's acceptance, and repurchase agreements. This market may

be used by large institutions, banks, and governments to fund their short-term cash

flow by selling short-term securities. 

Capital market

Meanwhile, the capital market focused on long-term loans. It provides fixed

and working capital to industry, as well as funding long-term and medium-term loans

for state, local, and federal governments with maturities of more than a year, as

opposed to money market loans. As a result, common stock capital market

transactions are similar to corporate debentures, stocks, securities, and government

bonds. Money flows into the capital market from people who have money to invest.

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 Commercial banks, merchant banks, and non-bank financial intermediaries such as

finance houses, insurance companies, venture capital, leasing finance, mutual funds,

unit trusts, and investment trusts are just a few examples. As a result, the capital

market is a set of institutions and methods through which long- and medium-term

money are combined and made available to enterprises, governments, and individuals.

The difference between the money market and the capital market. Money and

capital markets are essential for the global economy because they provide funding for

businesses and organizations to conduct and grow their operations. Both markets deal

in currency denominations more money every day and both markets have no physical

presence, trading is done via a cyber platform using an automated system. Large

companies and financial institutions have access to the money market, while tiny

individual investors have access to market capital. Money market instruments have a

relatively short maturity term and often less than a year, contrasted to capital market

assets which have a maturity length ranging from one to thirty years. The money

market typically satisfies the firm's short -term operating capital demands, but long

-term financing and funds for growth are usually acquired from the market capital.

1.2 FUNCTION AND ROLES OF MONEY MARKETS AND CAPITAL

MARKETS CAN INFLUENCE THE FINANCIAL MARKETS IN MALAYSIA

In capital market, the roles that affects the financial market of Malaysia is in

term of linking savers with investors. The capital market serves a function as a

connection between savers and investors. Contributes significantly to the mobilization

of savings and the distribution of funds to productive investors. In this aspect, the

capital market's function may be viewed as essential in moving financial resources

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from regions with surpluses to those with deficits and productive difficulties, thus

boosting productivity and prosperity.

Besides that, Investment Promotion. Capital markets make it easier for

businesses and governments to borrow money, which encourages investment. It offers

services through banks and non-bank financial organizations. Stocks, shares, and

bonds, among other financial assets which is an incentivize savers to lend to the

government or invest in enterprises. Capital becomes more mobile with the creation of

financial institutions, interest rates decrease, and investment rises.

In addition, encourage economic growth. Capital markets do not simply reflect

the condition of the economy at the time. In reality, it is also smoothing and speeding

the economic growth process. There are a variety of capital market organizations

available, including non-bank financial intermediaries that deploy resources sensibly

in line with national development requirements. Appropriate and sufficient resource

allocation will have a beneficial effect on the country's trade and industrial

development.

Meanwhile, as for the functions of money market that may affect financial

market of Malaysia is Profitable investment. Through the money market that allows

commercial banks to use excessive reserves in investments that will be profitable. The

primary aim of commercial banks is to earn from excess reserves while preserving

liquidity to satisfy the unpredictable cash needs of depositors. Commercial banks

profit without affecting liquidity by investing excess reserves in asset investments that

are highly liquid and simple to convert to cash.

Furthermore, the money market is used by central banks to implement their

policies. The central bank is in charge of a country's monetary policy and

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 guaranteeing a stable financial system, as we all know. The central bank has the

ability to make effective policy choices. One example is short-term interest rates. The

current situation of the banking sector is reflected in money market interest rates. This

will make it easier for the central bank to come up with an appropriate interest rate

policy that can help the investor save up a big amount of money.

Lastly, self -sufficiency of commercial banks. The money market was

established to assist commercial banks in becoming more self-sufficient. For example,

if a commercial bank needs money, it does not need to seek help from the central

bank, which would impose exorbitant interest rates on the loans supplied. Commercial

banks simply need to boost previous loans from the money market.

1.3 CONCLUSION

In a nutshell, money and capital markets help to improve the global economy.

It caters to the long-term as well as the short-term requirements of people, companies,

governments, and even businesses. It also offers a high return on investment, which

encourages investment. Financial markets' primary function is to make the process of

moving money from companies with excess funds to entities in need of funds easier.

The two major markets are the capital market and the money market. The capital

market trades long-term transactions; in other words, each market will trade various

financial instruments based on the maturity and collateralization of its assets. The

primary purpose of the financial system is to provide investment possibilities to the

public who have the opportunity to invest and to save excess money for those who do

not have the chance to participate.

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2.0 ASSIGNMENT 2

2.1 INTRODUCTION TO BANKS

2.1.1 MAYBANK

Maybank, officially known as Malayan Banking Berhad, was founded by

Malaysian businessman Khoo Teck Puat on 31 Mei 1960, making it 61 years old.

Datuk Abdul Farid Alias was named President and Chief Executive Officer of

Maybank Group on August 2, 2013. Maybank is now the most valuable corporation

on the Bursa Malaysia in terms of market value. Maybank has developed itself as a

strong brand in Malaysia and internationally throughout the years. Maybank is

included among the top 500 firms in the Forbes Global 2000 list of Malaysia's most

successful organizations. With total assets of USD 165 billion, Maybank is also one

of Southeast Asia's top five banks. Maybank employs 45,000 people and has a global

network of over 2,400 branches and offices in 20 countries, serving millions of

customers.

Maybank has its own vision and mission for the companies to achieve.

Maybank's vision is "Advancing Asia's Ambition With You," and their mission is to

humanize financial services throughout Asia by providing people with access to

financial services at fair terms and prices, and to be at the heart of the community at

all times. At the same time, Maybank made financial services more personal by

counselling clients based on their specific requirements.

Maybank provides a wide variety of goods and services, including the M2U

Visa Direct method, which was launched in cooperation with Visa International and is

the first money transfer service in Malaysia to give an option to transferring money to

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Visa card accounts in 200 countries. Maybank's commercial activity also includes the

introduction of the Maybank2u Pay Maybank2 service, which is a payment gateway

that facilitates shopping blog purchases by offering not only fast and secure

transactions, but also a pleasurable online shopping experience.

Maybank has always developed a work culture that stresses preserving and

sustaining the highest standards of corporate governance as a responsible organization

and also aggressive in improving adherence to best standards in corporate governance,

which are widely acknowledged as a competitive advantage throughout the globe.

Various procedures, policies, and actions have been adopted to date to guarantee a

higher level of transparency and to go beyond the requirements of the local

governance code and enforcement. The MAYBANK business has a very efficient and

fast-paced work environment. All initiatives carried out and executed will be better

structured and accomplish the objectives if such a work culture is fostered.

2.1.2 CIMB BANK

CIMB bank was founded in 1974 in Kuala Lumpur by Prime Minister Tun

Abdul Razak Hussein, however its original name at that time was Pertanian Baring

Sanwa Multinational Bank (PBSM). After being acquired by Bank of Commerce, the

bank was renamed Commerce International Merchant Bankers Berhad (CIMB) in

1986 and was successfully listed on the Bursa Malaysia the following year. CIMB

Bank is now one of the multinational banks in ASEAN nations such as Singapore,

Thailand, Indonesia, Vietnam, and China. The CIMB bank is ASEAN's fifth biggest

banking company by assets, with about 34,000 employees and over 16 million clients

as of the end of March 2021. CIMB Group Holdings Berhad is a publicly traded

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company on the Main Market of Bursa Malaysia, with a market value of RM43.1

billion as of March 31, 2021. Total assets were at RM608.6 billion as of March 31,

2021, with total shareholders' funds of RM57.4 billion and total Islamic assets of

RM150.0 billion. Khazanah Nasional Berhad owned 27.3 percent of the stock at the

end of April 2021, Employees Provident Fund had 16.1 percent, and Kumpulan Wang

Persaraan (Diperbadankan) had 6.4 percent. CIMB Bank's vision are to be one of the

leading ASEAN companies, with a mission to provide universal banking services in

Malaysia in an integrated manner as a company with superior performance in the

ASEAN region and other key regions, as well as to support the ASEAN integration

process and connect it to other regions. Among the commercial activities performed

by CIMB BANK include personal banking, in which customers may open their own

bank accounts, loan services, internet transactions, and many more.

2.1.3 BANK SIMPANAN NASIONAL (BSN)

Malaysia's Bank Simpanan Nasional (BSN) is a government-owned

institution. It was the first Savings Bank service in Perak and Selangor, which started

in the late 1800s. These banks were quickly absorbed into the country's Post Office

Savings Bank network, which by 1974 had grown to service over 2.5 million

depositors and had amassed assets of over RM537 million. The Bank Simpanan

Nasional Act, 1974, allowed the transfer of management authority from the Postal

Services Department to the bank's Board of Directors when BSN was formally

formed on December 1, 1974. BSN was formally inaugurated on the 5th of December

by YAB Tun Haji Abdul Razak Bin Hussein, Malaysia's Second Prime Minister.

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 Furthermore, being Malaysia's earliest and longest-running bank, BSN makes

every effort to actively encourage Malaysians to save and invest. BSN has grown with

the growth of our nation to become a contemporary and innovative bank that provides

a complete range of traditional and Islamic banking services. BSN has a nationwide

network of over 400 locations and over 5,000 EBB agents to service clients of various

races, professions, and ages. BSN is there to assist every Malaysian achieve a better

financial future, from cities and towns to rural villages and even the most distant

regions. BSN has always believed in the importance of putting money aside for the

future.

BSN's vision and mission are "No Malaysian Left Behind," and their mission

is "to build lifelong and meaningful relationships with customers to ensure they

continue to have access to a better life by providing the means for savings and

investments by the general public through a comprehensive range of banking services,

promoting and mobilizing savings, particularly among Malaysians." BSN's primary

goal has always been to assist Malaysians from all walks of life to improve their

savings and investing skills.

They are still on their mission today, providing even more goods and services

to meet the evolving requirements of contemporary living. BSN believes that by

doing so, every Malaysian would have an equal chance to live a better life. Bill

payment, Interbank GIRO (IBG), Western Union, Suruhanjaya Syarikat Malaysia

(SSM), Motor Insurance, and Auto Credit are among the services offered by BSN.

Rumahku, SME Financing, BSN Credit Cards, BSN Sijil Simpanan Premium (SSP),

BSN Skim Galakan Simpanan Pelajar (SGSP), and BSN GIRO Corporate were

among its offerings.

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2.2 CALCULATION OF FUTURE VALUE OF ANNUITY

2.2.1 MAYBANK, CIMB BANK AND BSN

Picture 1: Maybank basic saving account current interest rates

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Picture 2: CIMB basic savings account current interest rate

Picture 3: BSN basic savings account current interest rate

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The three pictures above were taken from the same type of account which is basic saving

account which all of the three banks offered the same current interest rates that is 0.25% for

amount less than RM100,000. Based on the question, it required to calculate the future value

an annuity of RM80,000 made at the beginning of every year for 10 years by using the saving

account current interest rates.

Calculation for MAYBANK, CIMB BANK AND BSN as their current saving account’s

interest rate is the same

( 1+r )n−1
Formula: FVA of Annuity Due= (1+ r ) × P [ ]
r

P = Periodic payment = RM80,000

r = Interest rate per annually = 0.25%

n = Number of periods = 10 years

r 0.25 %
Converting r % ¿ decimal= = =0.0025
100 100

( 1+0.0025 )10−1
FV of Annuity Due= (1+0.0025 ) × RM 80,000[ ]
0.0025

¿ ( 1.0025 ) × RM 80,000 [ 10,11325329 ]

= RM 811,082.91

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Calculation using FVIFAi,n timetable

(r = 0.25%, n = 10)
FVIn = P (FVIFA i,n ) (1 + r)
= 80,000 (10.462) (1 + 0.25)
= RM 1,046,200.00

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2.3 COMPARISON OF THE TOTAL SAVINGS BETWEEN THE THREE

COMMERCIAL BANKS

Malayan Banking CIMB Bank Bank Simpanan

Nasional (BSN)
Interest Rate %p.a 0.25% 0.25% 0.25%
Period 10 years 10 years 10 years
Periodic payment RM 80,000 RM 80,000 RM 80,000
Future Value Annuity RM 811,082.91 RM 811,082.91 RM 811,082.91
Future Value Annuity RM 1,046,200.00 RM 1,046,200.00 RM 1,046,200.00
FVIFA

Simple interest and compound interest are the two forms of interest offered.

Compound interest is the interest paid not only on the principal amount but also on any

interest due that is not withdrawn during the term (accumulated interest). Interest rates

influence the amount of interest payments that savers will earn on their savings. A rise in

interest rates makes saving more appealing and should encourage it. A decrease in interest

rates will diminish the benefits of saving and therefore tend to discourage saving. The

principle and time period are kept constant to demonstrate how interest rates affect the future

value of an investment. Based on the assignment question, the principal of the three

commercial banks is RM80,000 and the time period is ten years. However, we in the table

above shows that the current interest of all the banks offered the same amount of saving

account interest rates which is 0.25% per annum or per year.

So it can be concluded that there is no difference on the total saving of the three

commercial bank that is RM 811, 082.91 in 10 years. however, we can see in picture 1, 2, and

3 above lists about the amount of principal which is the higher principal amount a saver have

such as more than RM 80, 000 like RM 100, 000 each banks have different rates of interest so

it would change the total future value saving after ten years because the higher an interest

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rates offered, the higher amount of total saving earn. Furthermore, the interest rates are

compounded per annum which per years it also can affect the future value annuity of the

banks as if they offered different forms of interest offered such as compounded annually or

monthly surely it will influence a change.

2.4 CONCLUSION

In a nutshell, we can see that the most significant element in increasing money in a savings

account is the value of interest rates offered, as well as the types of interest rates used either

compounded annual, monthly, or even per annum. As a result, savers typically choose banks

with high interest rates because they will save a substantial amount of money at the end of the

time period. However, in these three banks, if a saver wanted to open a new saving account

and wanted a large return, they should invest more than RM80,000 principal because the

banks offer different interest rates for different categories of principal invested, such as Cimb

Bank that has a maximum amount and rates also changed.

2807 words

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REFERENCES

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https://www.imf.org/external/Pubs/FT/fandd/basics/58-money-markets.htm

2. Hayes, A. (2021, March 31). Capital Markets: What You Should Know. Investopedia.

https://www.investopedia.com/terms/c/capitalmarkets.asp

3. Thakur, M. (2021, June 22). Difference Between Money Market and Capital Market.

WallStreetMojo. https://www.wallstreetmojo.com/money-market-vs-capital-market/

4. Malaysia, A. (2020). Overview | Maybank. Maybank Malaysia.

https://www.maybank.com/en/about-us/who-we-are/overview.page

5. History | Who We Are | CIMB. (n.d.). CIMB BANK. https://www.cimb.com/en/who-

we-are/history/2010-2014.html

6. About CIMB | Investment Banking Asia | CIMB. (n.d.). CIMB BANK.

https://www.cimb.com/en/who-we-are/about-us.html

7. Bank Simpanan Nasional - History. (n.d.). BSN.

https://www.liquisearch.com/bank_simpanan_nasional/history

8. CIMB Regular Savings Account. (n.d.). RinggitPlus.

https://ringgitplus.com/en/savings-account/CIMB-Regular-Savings-Account.html?

filter=CIMB

9. R. (n.d.). BSN Basic Savings Account. RinggitPlus. https://ringgitplus.com/en/savings-

account/BSN-Basic-Savings-Account.html?filter=BSN

10. Savings Account Rates | Maybank Malaysia. (n.d.). Maybank.

https://www.maybank2u.com.my/maybank2u/malaysia/en/personal/rates/saving_acco

unt_rates.page

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