MF0017 - MERCHANT BANKING AND FINANCIAL SERVICES

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MF0017 & MERCHANT BANKING AND FINANCIAL

ASSIGNMENT

DRIVE	SPRING 2015
PROGRAM	MBADS – (SEM 4/SEM 6) / MBAN2 / MBAFLEX – (SEM 4) / PGDFMN – (SEM 2)
SUBJECT CODE & NAME	MF0017 - MERCHANT BANKING AND FINANCIAL SERVICES
SEMESTER	4
BK ID	B1815
CREDITS	4
MARKS	60

Note: Answer all questions. Kindly note that answers for 10 marks questions should be approximately of 400 words. Each question is followed by evaluation scheme.

1 Rating methodology is used by the major Indian credit rating agencies. Explain the main factors of that are analyzed in detail by the credit rating agencies.

Answer : A Credit Rating issued by a credit rating agency is an assessment of the credit worthiness of individual financial securities (For example, a bond) and debt issued by corporations, government issued securities or even a country’s ability to repay debt.

Credit Ratings are assigned by rating agencies to companies and debt instruments, are designed to gauge the likelihood that a company will default on its obligations to creditors. Thus, they give investors a rough idea of the risk associated with loaning money to the entity being rated.

Credit ratings are forward-looking opinions about credit risk. It express the agency’s opinion about the ability and willingness of an issuer, such as

2 Give the meaning of the concept of venture capital funds. Explain the features of venture capital fund.

Answer : Venture Capital Funding can be of different kinds. Early stage funding could be at the stage of ideation, initial production and marketing. Expansion funding is done during commercial production, marketing and growth (For more information refer to the article – Stages of Venture Capital Funding). Different funds focus on different types of funding and sectors. There are however some unifying characteristics of venture capital funds.

Features of venture capital funds

3 Hire purchase is one of the important concept. There are certain features of hire purchase agreement so explain the points of it. Differentiate between hire purchase and leasing.

Answer : Meaning and characteristics of hire purchase finance :

A method of buying goods through making installment payments over time. The term hire purchase originated in the U.K., and is similar to what are called "rent-to-own" arrangements in the United States. Under a hire purchase contract, the buyer is leasing the goods and does not obtain ownership until the full amount of the contract is paid. The characteristics of hire-purchase system are as under

• Hire-purchase is a credit purchase.
• The price under hire-purchase system

4 Explain the concept of Depository receipts. Write down the difference between American Depository Receipts (ADR) and Global Depository Receipts (GDR) also mention the issues involved in ADR/GDR.

Answer : A DR is a type of negotiable (transferable) financial security traded on a local stock exchange but represents a security, usually in the form of equity, issued by a foreign, publicly-listed company. The DR, which is a physical certificate, allows investors to hold shares in equity of other countries. One of the most common types of DRs is the American depository receipt (ADR), which has been offering companies, investors and traders global investment opportunities since the 1920s.

Since then, DRs have spread to other parts of the globe in the form of global depository receipts (GDRs). The other most common type of DRs are European DRs and International DRs. ADRs are typically traded on a US national stock exchange

5. What is Online Trading? Explain the process of online trading.

Answer : The trade in stocks and other instruments has been there for many years. It used to be done physically with stock traders shouting their orders in a crowded hall. With technological advancement, online trading has become common. Now you can make a fortune buying and selling stock from the comfort of your home using a computer.

Open a Broker Account

Choose a suitable online broker. A brokerage firm will be trading stock on your behalf. It normally charges a fee in form of a percentage of the traded stock. You should choose a brokerage firm wisely. If you plan to be an active trader, you should look for a broker with low fees. If you plan to buy only one stock and keep it, you should bear in mind that some brokerage firms charge a fee for inactivity over a certain period of time. It will be

6Write short notes on:

a.Depository Participants

Answer : A Depository refers to “An organization that facilitates holding of securities in the electronic form and enables DPs to provide services to investors relating to transaction in securities”.

A Depository Participant (DP) can be a financial organization like banks, brokers, financial institutions, custodians, etc., acting as an agent of the Depository to make its services available to the investors.

There are two depositories in India, namely NSDL and CDSL.

b.Benefits of Depository Systems

Answer : In the depository system, share certificates belonging to the investors are dematerialized and their names are entered in the records of depositary as beneficial owners. Investors’ names in the companies register are replaced by the name of depository as the registered owner of the securities. The beneficial owner continues to enjoy all the rights and benefits and be subject to all the liabilities in respect of the securities held by the depository. The ownership changes in, the depositary are done automatically on the basis of delivery vs. payment.

The investors opting to join depository mode are required to enter into agreement with depository through a participant who acts as an agent of

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Send your semester & Specialization name to our mail id :

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