MEC-110: MONEY, FINANCIAL INSTITUTIONS AND MARKETS Tutor Marked Assignment – 2024-25 Course Code: MEC-110 Assignment Code: Asst /TMA /2024-25 Total Marks: 100 Section-A Answer the following questions in about 700 words each. Each question carries 20 marks. 2X20=40 a. What are the different kinds of risk associated with financial transactions? b) How do financial and […]
Introduction The Capital Asset Pricing Model (CAPM) and the Efficient Market Hypothesis (EMH) are two fundamental theories in finance that help explain how assets are priced and how markets behave. CAPM provides a method to determine the expected return on an investment, while EMH explains how information is reflected in market prices. This answer covers
a) Yield to Call (YTC) Yield to Call is the return an investor expects to earn if a bond is called (redeemed) by the issuer before its maturity date. Many corporate and municipal bonds are callable, meaning the issuer can repay the bond before it matures, usually after a lock-in period. Formula: YTC = [C
Introduction Monetary policy is the process by which a country’s central bank controls the money supply and interest rates to achieve macroeconomic objectives such as inflation control, economic growth, and employment. The effectiveness of monetary policy depends on its transmission mechanism – the channels through which policy decisions affect the broader economy. Both commercial banks
Part A: Valuation of Bond Given: Face Value (FV) = ₹1,000 Coupon Rate = 8% → Annual Coupon = 8% of ₹1,000 = ₹80 Redemption Value = ₹1,000 + 10% premium = ₹1,100 Time to maturity = 3 years Discount Rate (r) = 12% Formula for Present Value of Bond: Bond Value = Present Value
Introduction Capital markets play a vital role in mobilizing savings and channeling them into productive investments. They provide a platform where long-term securities like stocks and bonds are bought and sold, facilitating capital formation in an economy. Understanding their functions and concepts like the Modigliani-Miller theorem helps in appreciating how financial markets contribute to economic
Introduction The exchange rate is the price of one country’s currency in terms of another. It determines how much foreign currency one can get for a unit of domestic currency, or vice versa. Exchange rates play a crucial role in international trade, investment, and economic policy. Stable exchange rates are essential for macroeconomic stability, inflation
Introduction Financial transactions are at the core of economic activity, but they carry various forms of risk that can affect investors, businesses, and economies. Understanding these risks is crucial for effective financial planning and policy formulation. Furthermore, the interaction between financial and economic factors becomes highly significant during periods of crisis, such as the Global
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