BBA 6th Semester
Financial Markets Services Board Question Paper 2025

List the four different kinds of financial assets.

What are the four common characteristics of financial services.

For example, a bank enters into a reverse repurchase agreement in which it agrees to buy
central bank funds from one of its corresponding banks at a price of Rs 100,000 and promises
to sell these funds back at a price of Rs 100,125 after five days. Find the yield on this repo to
the bank.

You are considering an investment in a municipal bond that is paying 6.25 percent annually. If
your marginal tax rate (T) is 21 percent, find the tax-equivalent rate of interest on this bond.

State the key features of microfinance in Nepal.

Differentiate the funded pension funds with non-funded pension funds.

Assume you own 20,000 shares of common stock of a company with 2 million total shares
outstanding. The company announces a plan to sell additional shares through a right offering,
how many of the new shares can you purchase if you exercise your preemptive rights?

An investor purchases a mutual fund share for Rs 100. The fund pays dividends of Rs 2,
distributes a capital gain of Rs 3, and charges a fee of Rs 1.5 when the fund is sold one year
later for Rs 106. What is the one-year rate of return on this investment?

Define the credit rating agencies.

What does the AT I in bank capital regulation stand for?

Discuss the key components of financial system of Nepal.

Explain the reasons behind the financial market regulation.

Describe the essential feature of insurance.

What is mutual fund? Why it is thought important to the investors of the country like Nepal?
Explain.

An insurance company collected 7.25 million in premiums and disbursed 2.11 million in
losses. Loss adjustment expenses amounted to 5.6 percent and dividends paid to
policyholders totaled 2.5 percent. The total income generated from their investments was Rs
200,000 after all expenses were paid.
a. What is the combined ratio?
b. What is the operating ratio?
c. What is the net profitability in percent?

For example, 28-days maturity Treasury bills has purchase price of Rs 99.51. The face value
of this bill is Rs 100.
a. Calculate Treasury bill’s bank discount rate.
b. Calculate coupon equivalent yield.
c. Find the effective annual rate.

A taxable company sponsors a typical pension plan into which the employee deposit 12
percent of employees Rs 60,000 annual income. The company matches 50 percent of the first
5 percent of employee’s earnings. Employee expects the fund to yield 10 percent next year. If
employee is currently in the 31 percent tax bracket, what is the annual investment in this
pension plan? Also find the one-year return.

In order to mobilize the long-term funds from savers to ultimate users, the capital market
performs important functions. In essence, companies seeking the long-term funds issue the
popular instruments, particularly; bonds, preferred stock, and common stock. Each of these
instruments, however, has its own distinct characteristics. Explain using appropriate
examples.

You plan to purchase a house costing Rs 125,00,000 using a 30-year mortgage obtained from your local bank.
a. What is a required down payment for a home buyer?
b. Calculate your monthly payments on this mortgage.
c. Separate the amount of interest and principal paid in the 25th installment payment.

Use the following information about the bank capital of a typical commercial bank and
answer the required below. Figures are in million.
Equity share capital (paid up) 2,000
Share premium 1,400
Undivided or retained earnings 600
Subordinated term debt 450
General loan loss provision 750
Assets revaluation reserve 70
Statutory general reserves 900
Capital redemption reserve 525
Exchange equalization reserve 75
Investment adjustment reserve 71
Capital adjustment reserve 22
Intangible assets 40
Investment in equity of institutions with financial interest 85
a. Compute the common equity tier I capital.
b. Compute the total capital of the bank.
c. Does this bank hold adequate enough capital, if the risk weighted exposure of this
commercial bank is Rs 70,250 million? Why?

The Himal Company has issued 6,000,000 new shares. Its investment bank agrees to
underwrite these shares on a best-efforts basis. The investment bank is able to sell 5,200,000
shares for Rs 54 per share.
a. It charges the issuer Rs 1.25 per share sold. How much money does Himal receive?
b. What is the investment bank’s profit?
c. On a best-effort basis as in given above, who bears the risk? Why?

Nepal Rastra Bank is responsible for fine-tuning the money supply in the banking system.
The most commonly used monetary tools used by central banks around the world to manage
money supply condition are open market operations, discount window loans, and required
reserve ratios. The required reserve ratio is particularly the ratio of the deposits held by
commercial banks which must be placed at the account maintained at the central bank, and
the bank cannot lend it out. Increased required reserve ratio usually mean the less amount is
available for credit which ultimately lowers the total amount of money in entire banking
system and vice versa. To see an effect of change in required reserve ratio to banking
deposits, for example, assume a typical commercial bank that reports existing transaction
deposit of Rs 500 billion on its balance sheet. The current required reserve ratio set by centra
bank is 8 percent. If the new required reserve ratio is set 7 percent, answer the required that
follows below.
a. Mention the major issues discussed in this given text.
b. Show the initial balance sheet of the central bank and the commercial bank in a simplified
version.
c. Calculate the change in transaction deposit and new level of deposits if this commercial
bank converts 80 percent of its excess reserves to loans and borrowers return 70 percent of
these funds to the commercial bank as transaction deposits.
d. Show the balance sheet of the central bank and the commercial bank for the given case (c),
assume there is only one commercial bank in the banking system.
e. Why do you think the negative relationship exist between the change in required reserve
ratio and deposit expansion/contraction in the banking system?