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CQIB FINAL EXAM STUDY QUESTIONS
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CQIB FINAL EXAM STUDY QUESTIONS
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CQIB FINAL EXAM STUDY QUESTIONSRole of Banks - Answers- 1. Act as financial intermediary between savers and
borrowers.
2. Facilitates the creation of money.
3. Creates financial products and services.
4. Develops mechanisms for transferring money and making payments.
5. Contributes to the development of the economy.
Debt Capital Markets - Answers- When a large company or government wants to
finance a project, it may look to issue bonds to raise capital.
An Investment bank would help out in planning/documentation of bond issuance.
Equity Capital Markets - Answers- When a company needs more money in order to
grow, they may look at undertaking an initial public offering(IPO). Where it sells it's
shares to the public/investors.
The investment bank will put together a prospectus explaining the terms of the
offering and the risks it carries, managing the issuance process and helping the price of
the offering.
Private Placements - Answers- Where customers plan an offering of bonds with an
institutional investor such as
an insurance company or a retirement fund.
Can have be a quicker option as there is lower regulatory requirements.
Mergers and Acquisitions - Answers- Where a company is looking to buy another
company, investment banks offer
advice on how the company should proceed with the acquisition, including the pricing of
the offer.
Deposits for a Bank - Answers- Banks source their funds largely from deposits.
Savings deposits - wages and salary.
Fixed term deposits - lump sum deposited for a specific period.
Current deposits - business accounts.
Types of Bank Loans - Answers- 1. Overdraft
, 2. Credit card
3. Short term money loans
4. Long term loans
5. Bills of exchange and promissory notes
6. Equipment leasing and hire purchase
7. Trade finance
Bills of exchange and promissory notes - Answers- Specialised instruments, being an
unconditional order in
writing between parties, where the bank purchases the bill amount from the borrower,
deducting charges.
On maturity the bill is presented to the borrower and the full amount is collected.
Equipment leasing and hire purchase - Answers- Common forms of borrowing for the
financing of plant,
machinery and vehicles by individuals and businesses.
Taxation benefits are often linked to these forms of debt, making them popular funding
options.
Trade finance - Answers- Facilitating import and export transactions including lending,
letters of credit, factoring (accounts receivable financing), export credit and insurance.
Insurance - Answers- Many banks offer insurance as part of their products and
services. Depending on what is
being insured against, the insurer agrees to pay money to help cover costs should
certain
events occur.
Can use metrics such as Return on Asset (ROA) and Return on Equity ratios (ROE) to
determine.
Assets of a Bank - Answers- Interest earning assets =>
-Home loans
-Loans to customers
-Business and corporate loans
-Cash
Non-Lending Interest
Earning Assets
Non-Earning Assets
-Premises e.g branches, offices
-Equipment e.g computers, furniture, vehicles
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