Download operation and banking techniques i questions and answer guides. 2021

NATIONAL POLYTECHNIC UNIVERSITY INSTITUTE BAMEMDA SCHOOL OF BUSINESS, FINANCE, MANAGEMENT AND LAW FIRST SEMESTER EXAMINATION : 2020/2021 ACADEMIC YEAR Course Title: OPERATIONS AND BANKING

TECHNIQUES I Program: HND Level 100: Banking and Finance Duration: 2 hours Lecturer: Wirba Julius Kumo SECTION A _ANSWER ALL QUESTIONS IN THIS SECTION_ 1. Who is a bank customer? (4 MARKS)

2. State the basic documents required to open a personal account in a bank (4 MARKS) 3. List any four banking services to business customer (4 MARKS) 4. a)When a customer opens a checking

account in a bank the bank may give him/her which of the following cards to let him/her get spend money from the account without writing check A) A debit card B) A bank debit card C) A

prepared debit card D) a Payroll card. Which one is correct? (2MARKS) b) Devaluation makes A) import cheaper and export dearer B) export and import to become elastic C) export supply to be

elastic D) export cheaper and import dearer. Which of the above is correct (2marks) 5) Distinguish between transaction risk and translation risk faced by importers and exporters? (4MARKS)

SECTION B: _ANSWER TWO QUESTIONS_ 1. Explain the banking services that are perform to personal customers (20 MARKS) 2. What are the advantages and disadvantages of fixed exchange rate

regime? (20 MARKS) 3. What are the effects of devaluation of currency on the country that carries out devaluation of its currency? (20 MARKS) 4. Which elements of marketing are used by banks

in their strategic marketing management? (20 MARKS) ANSWER GUIDES SECTION A _ANSWER ALL QUESTIONS IN THIS SECTION_ 1. Who is a bank customer? (4 MARKS) A customer is any legal or physical

person that has opened an account with the bank in his/her name and has undertaken some contract with the bank. Bank customers can be classified into personal and business customers 2. State

the basic documents required to open a personal account in a bank (4 MARKS) The basic conditions required to open personal accounts are -The person’s name -The person’s address -The

person’s occupation -The person’s specimen signature -Copies of passport size photographs etc. 3. List any four banking services to business customer (4 MARKS) -Financing. -Performance

bonds. -Accounting -Advisory services -assistance in exportation and importation financial activities 4. a)When a customer opens a checking account in a bank the bank may give him/her which

of the following cards to let him/her get spend money from the account without writing check A) A debit card B) A bank debit card C) A prepared debit card D) a Payroll card. Which one is

correct? (2MARKS) A IS CORRECT b) Devaluation makes A) import cheaper and export dearer B) export and import to become elastic C) export supply to be elastic D) export cheaper and import

dearer. Which of the above is correct (2marks) D is correct 5) Distinguish between transaction risk and translation risk faced by importers and exporters? (4MARKS) Transaction risk is the

risk that the exchange rate will change adversely between the transaction date and the settlement date. Many international transactions are on credit period that varies from 1 to 3 months.

Within this period , exchange rates may adversely change. The greater the time differential between the entrance and settlement of the contract, the higher the TRANSACTION RISK, because

there is more time for the two exchange rates to fluctuate. Whereas Translation refers to the process of converting an amount of money from foreign currency to a home currency. This is done

using foreign exchange rates which may give rise to gains and losses and no cash flows are involved. Translation risk is the risk that there would be adverse movement in the values of assets

and liabilities of parent companies and subsidiary companies when the financial statement of the company are translated into the parent company through the process of consolidation. For

example MTN Cameroon recording its assets and liabilities in SECTION B: _ANSWER TWO QUESTIONS_ 1. Explain the banking services that are perform to personal customers (20 MARKS) *DEFINE

PERSONAL CUSTOMERS *EXPLAIN THE FOLLOWING BANKING SERVICES RENDERED TO PERSONAL CUSTOMERS -Guarantees and indemnities -Taxation services -Insurance services -Status inquiries -Safes custody

of deposits of cash and valuables -Management of investments: -Hire purchase -Travel services -Cash cards -Credit card -Cheque cards (cheque Guarantee cards) 2. What are the advantages and

disadvantages of fixed exchange rate regime? (20 MARKS) *Define fixed exchange rate * explain the following B) ADVANTAGES OF FIXED EXCHANGE RATE SYSTEM. Fixed exchange rate system has the

following advantages. 1. CERTAINTY. There is certainty in international trade since the value of the country’s currency in terms of other currencies is always certain. 2. REDUCED

SPECULATION. There is reduced speculative activity since there are fewer opportunities for gains or losses. 3. STABILITY. There is stability in the domestic economy since there are fewer

possibilities of short-term variations in the volume of exports and imports. C) DISADVANTAGES OF FIXED EXCHANGE RATE. Fixed exchange rates have the following disadvantages. 1. NO AUTOMATIC

ADJUSTMENT. Adjustments to balance of payment disequilibrium are never automatic. They can take place only through government intervention. 2. LESS FREEDOM FOR THE GOVERNMENT. The government

does not have a greater freedom to pursue domestic goals. The government has to take care of both foreign goals and domestic goals. 3. LESS ECONOMY IN THE USE OF THE FOREIGN RESERVES. There

is less economy in the use of foreign exchange reserves for the government may be required to freely supply more of the home currency when there is increase in demand for it simply in order

to maintain the fixed exchange rate. 3. What are the effects of devaluation of currency on the country that carries out devaluation of its currency? (20 MARKS) I) EFFECTS OF DEVALUATION

CONDITIONS NECESSARY FOR DEVALUATION TO YIELD ANY GOOD EFFECTS For devaluation to yield good effects to a country carrying out devaluation the following conditions 1, 2 and 3 known as

Marshal-Lerner conditions must be fulfilled. 1. DEMAND FOR EXPORT MUST BE ELASTIC. Since devaluation makes export to be relatively cheaper if it demand is elastic this will lead to more than

proportionate increase in quantity of export bought by trading partners. This will equally lead to more than proportionate increase in export revenue. 2. DEMAND FOR IMPORT MUST BE ELASTIC.

Since devaluation makes import to be relatively dearer if its demand is elastic this will lead to more than proportionate decrease in quantity of import bought from trading partners. This

will equally lead to more than proportionate decrease in import expenditure. 3. SUPPLY OF EXPORT MUST BE ELASTIC. The country must have idle production capacity to supply more exports. This

will enable the country to satisfy the increase in demand for export due to devaluation so as to earn more export revenue. 4. NO RETALIATION BY TRADING PARTNERS. The other countries must not

retaliate by devaluating their own currencies. If they do so the situation will be neutralised. MARSHAL-LERNER CONDITION Marshal-Lerner condition states that, on assumption of high price

elasticities of supply, currency depreciation or devaluation will improve the balance of payment on current account, demand for import plus foreign demand for export exceeds unity. That is

PED for export +PED for import >1 Conditions 1, 2 and 3 above are explanation of the Marshal-Lerner condition. _POSITIVE EFFECTS OF DEVALUATION_ 1. EXPORT BECOME RELATIVELY CHEAPER AND

IMPORT DEARER. In the case where demand for export and import is price elastic this will lead to increase in export earnings and decrease in import expenditures. 2. ENCOURAGEMENT OF IMPORT

SUBSTITUTION INDUSTRIES. Since imports are now dearer people will prefer local substitutes. 3. ENCOURAGEMENT OF EXPORT PRODUCING INDUSTRIES. With high demand for exports entrepreneur will be

encouraged to establish exports producing industries. 4. INCREASE EMPLOYMENT. The setting up of both import substitution and export producing industries will let to increased employment of

labour and other resources of the country. 5. BALANCE OF PAYMENT DEFICIT WILL BE SOLVED. Since devaluation following the conditions above led to increase in foreign earnings and BOP deficit

will be wiped out and a balance of payment surplus may be realized. _NEGATIVE EFFECTS OF DEVALUATION_ 1. INFLATION MAY WORSEN. Too much foreign earnings will mean too much money in the

economy and fewer goods available since most supplies are tilted to the foreign market. This will make demand exceed supply leading to inflation (rising prices) 2. INCREASE IN THE BURDEN OF

EXTERNAL DEBTS. The payment of any external loan will require a greater volume of export or greater amount of home currency. For example, before devaluation, 50CFAF= 1FF and after

devaluation 100CFAF=1FF; a debt of the 50 million CFAF will be paid after devaluation using 100 million CFAF. _4. WHICH ELEMENTS OF MARKETING ARE USED BY BANKS IN THEIR STRATEGIC MARKETING

MANAGEMENT? (20 MARKS)_ *Define strategic marketing management. Planning, organizing, leading and controlling marketing activities geared at achieving the objective of a bank *Explain the

following marketing elements Product, Price, promotion, place, people, process and physical appearance.