ASSIGNMENT 1

Financial market is a word that describes a marketplace where bonds, equity, securities,
currencies are traded. A financial market is referred to space, where selling and buying of
financial assets and securities take place. In other words financial markets are the
intermediary that connects the capital depositors with borrowers in the economy. It
allocates limited resources in the Malaysian’s economy. In Malaysia there are two main
financial markets which known as Money market and Capital market. Money markets are
used for short-term lending or borrowing usually the assets are held for one year or less
whereas, Capital Markets are used for long-term securities they have a direct or indirect
impact on the capital. Trade Credit, Commercial Paper, Certificate of Deposit, Treasury
Bills are some examples of short-term debt instruments. Money Market securities are
very liquid in nature, and hence, their redemption period is restricted to one year.
Although the return of investment in money market securities is low compared to Capital
Market securities, they are comparatively safer than Capital Market securities due to the
low default risk. Stocks, bonds, debentures are the securities which will be traded in
Capital market. The maturity period of securities in the Capital Market is more than one
year or irredeemable. Capital markets are composed of primary and secondary markets.
The primary market is the one in which newly issued securities are subscribed by the
public. It is also called as initial public offerings (IPO) Market. Primary Market also
includes the issue of further capital by companies whose shares are already listed on
stock exchanges. There are different types of intermediaries that operate in this market in
order to assist in completing transactions. Secondary Market is a market where already-
issued securities are traded among investors. In this market, an investor purchases a
security from another investor rather than the issuer, subsequent to the original issuance
in the primary market.

Money market provides a ready source of funds for market participants in need of
funding, and investment outlets for those with temporary surplus funds. In Malaysia, the
major financial institutions are the participants in the money market, and the development
of the financial system and that of the money market are closely interrelated. The money

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market provides funding to the banking system. Money market provides alternative
funding to the banking system as banks are obliged to put aside a portion of their deposits
in a form of reserves that are restrained by the Central Bank without any returns or
interest while lesser rules and regulations implemented on the money market, making it
'ideal' place. (Mishkin and Eakins, 2009). Besides that, money market promotes savings.
People who trade in money market are basically investing short team and trying to get
return on it. The money is invested to fulfill a need of the investor. It provides the
investor with the flexibility to go forward with investing the sum that he wants to invest
and the time period of the investment within a year. This helps the financial market in
Malaysia by keeping money in the cycle. Next, money market encourages entrepreneurs
to invest. For small and medium size business, is it tough to secure loans at a low instate
rate. Money market makes it possible for such businesses to secure their source of capital.
It also provides the opportunity for these firms to discount bills of exchange. These roles
of money market enhance the financial market in Malaysia.

Capital markets connect the monetary sector with the real sector, which is the sector of
the economy concerned with the production of goods and services. Considering this role
in the economy, the capital markets play an important role in financial market as they
facilitate growth in the real sector by giving producers of goods and services, and entities
tasked with infrastructure development. In addition, capital market increases the
proportion of long-term savings such as pensions, life covers, which is channeled to long-
term investment. Capital market enables contractual savings industry such as pension and
provident funds, insurance companies, medical aid schemes, collective investment
schemes and more to mobilize long-term savings from small individual household and
channel them into long-term investments. It fulfills the transfer function of current
purchasing power, in monetary form, from surplus sectors to deficit sectors, in exchange
for reimbursing a greater purchasing power in future. In this way, capital market enables
corporations to raise capital/funds to finance their investment in real assets. Next, it
provides opportunity for the public to invest their savings in attractive securities which
provide a higher return. Besides that, w well developed capital market is able to attract

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the fund foreign other countries. Therefore, our financial market will be known by the
countries around the world.

In summary, financial markets enable money channelization between two or more

parties. Money market and capital market help in channelizing funds from the lenders to
the borrower depending on the timeframe of requirements and its purpose. Thus, money
market and capital market fulfills the long-term and short-term capital requirements of
the individual, corporate, firms, and government based on tenure, risk appetite, purpose,
and more. However, both markets are playing important roles equally to enhance our
Malaysian financial markets.

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ASSIGNMENT 2

The Malaysian banking sector consist of 27 commercial banks including 19 licensed

foreign banks, 11 investment banks, 18 Islamic banks as well as non-bank financial
institutions. Among that, AmBank Group is a leading financial services group with over
40 years of expertise in supporting the economic development of Malaysia. The chairman
of this AmBank Group is Tan Sri Azman Hashim. Next is Maybank , among the top 5
banks in South East Asia with total assets of USD165 billion. It has an international
network of over 2,400 branches and offices in 20 countries and employing 45,000
employees. Public Bank is the third largest banking group in Malaysia with total asset
size of RM451.26 billion as at end of 2020 and is the second largest company listed on
Bursa Malaysia with total market capitalisation of RM79.97 billion. All these three bank
offering savings account with different rates. Below shows the calculation of future value
of an annuity of RM 80,000 made at the beginning of every year for 10 years according
to the interest rate provided by three different banks.

1. AmBank
Effective Date: 15 July 2020
Amount (RM) Rates Per Annum
Up to RM5,000 0.25%

A= [
( 1+i )( n )−1
i ]
FVAn =

FVAn = A(FVIFAi,n)

FVAn=80000 [ ( 1+0 . 25 )(10 )−1

0 . 25 ]
FVAn= [
80000 (1+0 . 25 )( 10) −1
0 . 25 ]
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 80000 [ ( 1 . 25 ) −1 ]
(10 )
FVAn=
0. 25

= RM 2,660,232.24

2.
Maybank

Interest Rates
Savings Band
(% p.a.)
Up to RM100,000 0.20

A= [
( 1+i )( n )−1
i ]
FVAn =

FVAn = A(FVIFAi,n)

FVAn=80000 [ ( 1+0 . 20 )(10 )−1

0 . 20 ]
FVAn= [
80000 (1+0 . 20 )( 10) −1
0 . 20 ]
80000 [ ( 1 . 20 ) −1 ]
(10 )
FVAn=
0. 20

= RM 2,076,694.57

3. Public Bank
BASIC SAVINGS ACCOUNT - effective 11 February 2021

Range Nominal Interest Rate (% p.a.) Effective Interest Rate (% p.a.)

All Balances 0.25 0.25

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 A= [
( 1+i )( n )−1
i ]
FVAn =

FVAn = A(FVIFAi,n)

FVAn=80000 [
( 1+0 . 25 )(10 )−1
0 . 25 ]
[ ]
( 10 )
80000 (1+0 . 25 ) −1
FVAn=
0 . 25
80000 [ ( 1 . 25 ) −1 ]
(10 )
FVAn=
0. 25

= RM 2,660,232.24

Banks Interest rate Value of Annuity

AmBank 0.25 %
RM 2,660,232.24

MayBank 0.20 %
RM 2,076,694.57

Public Bank 0.25 %

RM 2,660,232.24

Table above shows the final value of annuity determine by three different commercial

banks. Based on the calculation, AmBank and Public Bank having high annuity value of

RM 2,660,232.24 due to the 0.25% of interest offered by both banks. Maybank has RM

2,076,694.57 value of annuity due to the 0.20% of interest rate offered. In summary, the

higher the interest rate offered by banks the higher the value of an annuity.

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 ATTACHMENT

REFERENCES

1. Mishkin F, Eakins S. (2009). Financial Markets and Institutions, 6th Edition. Pearson.

2. Rates, Fees & Charges. https://www.ambank.com.my/eng/rates-fees-charges

3. Golden Savers Savings Account.

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

saving_account_rates.page

4. Savings and Current Accounts Interest Rates. https://www.pbebank.com/Personal-

Banking/Rates-Charges/Deposit-Interest-Rates/Savings-and-Current-Interest-

Rates.aspx

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