1. What is financial repression?
2. What are some of the challenges of financial repression?
3. Briefly explain the various categories of financial innovations
4. Explain 3 uses of the REPO agreement, commercial paper and treasury bills.
5. Explain how to value money market securities
6. Explain the following Depository institution can borrow short and lend long Depository institutions can
borrow long and lend short
7. Explain the various types of depository and non depository financial institutions, their functions and
risks or challenges they face
8. Mention and explain five types of bond
9. How did the DDEP affect the bond market in Ghana?
10. Explain the various techniques used to value stock
1. Financial Repression: Financial repression refers to a set of policies implemented by
governments or central banks to channel funds into domestic markets at low interest
rates, often below the inflation rate. This is typically done to reduce government
borrowing costs, support economic growth, and manage public debt. Financial repression
can include measures such as interest rate caps, directed credit, reserve requirements, and
restrictions on capital movements.
2. Challenges of Financial Repression: a. Low Returns for Savers: With artificially low
interest rates, savers may earn lower returns on their investments, leading to diminished
purchasing power over time.
b. Misallocation of Capital: Financial repression can lead to a misallocation of capital, as it
encourages investors to invest in less efficient or less productive projects simply because they are
backed by the government or have guaranteed returns.
c. Market Distortions: Interest rate controls and other forms of financial repression can create
distortions in the market, making it challenging for market forces to operate efficiently.
3. Categories of Financial Innovations: a. Payment and Settlement Systems: Innovations in
payment methods, such as mobile payments and digital wallets, facilitate quick and
secure transactions.
b. Financial Instruments: New types of financial instruments are continuously developed,
including derivatives, asset-backed securities, and exchange-traded funds (ETFs).
c. Technology-Driven Platforms: Online platforms and fintech solutions provide alternative ways
of accessing financial services, like peer-to-peer lending and crowdfunding.
d. Risk Management Techniques: Financial innovations have led to new risk management tools
like credit default swaps and catastrophe bonds.
4. Uses of Financial Instruments: a. REPO Agreement: Repurchase agreements (REPOs)
are used for short-term borrowing and lending of securities, with the seller agreeing to
repurchase the securities at a later date. They help financial institutions manage shortterm liquidity needs.
b. Commercial Paper: Companies issue commercial paper to meet short-term funding
requirements. Investors buy these instruments and earn interest, while companies get access to
short-term funds without having to seek bank loans.
c. Treasury Bills: Governments issue treasury bills to raise funds for short periods. These are
low-risk investments, and investors earn interest based on the difference between the purchase
price and the face value at maturity.
5. Valuing Money Market Securities: Money market securities are typically short-term,
low-risk instruments. Their valuation is relatively straightforward as their prices are
generally close to their face value. For Treasury bills and commercial paper, investors
can calculate the yield to maturity (YTM) based on the purchase price and the final
payment at maturity. For REPO agreements, the interest earned by the lender is the
difference between the repurchase price and the original sale price.
6. Depository Institutions' Borrowing and Lending Practices: a. Depository Institutions Can
Borrow Short and Lend Long: This means that depository institutions, like banks, can
borrow money from depositors on short notice (short-term deposits) and lend it to
borrowers for longer terms, such as through mortgages or long-term loans.
b. Depository Institutions Can Borrow Long and Lend Short: In this case, depository institutions
might issue long-term certificates of deposit to raise funds and then use those funds to make
short-term loans to consumers or businesses.
7. Types of Financial Institutions: a. Depository Institutions: These include commercial
banks and credit unions, which accept deposits from customers and provide loans and
other financial services.
b. Non-Depository Institutions: Examples include insurance companies, mutual funds, and
brokerage firms that offer financial services but do not accept deposits.
Functions and Risks/Challenges:


Depository Institutions: Their primary function is to facilitate the flow of funds from
savers to borrowers. Risks include credit risk, interest rate risk, and liquidity risk.
Non-Depository Institutions: Functions vary depending on the type, but generally, they
offer investment products and risk management solutions. Risks include market risk,
credit risk, and operational risk.
8. Types of Bonds: a. Treasury Bonds: Issued by governments to raise funds for long
periods. They are considered low-risk and typically pay fixed interest.
b. Corporate Bonds: Issued by corporations to raise funds. They carry higher risk than
government bonds but offer potentially higher yields.
c. Municipal Bonds: Issued by state or local governments to fund public projects. Interest on
municipal bonds is often tax-free.
d. Convertible Bonds: These bonds can be converted into a specified number of company shares
at the holder's option.
e. High-Yield (Junk) Bonds: Issued by lower-rated companies with a higher risk of default, but
they offer higher yields to compensate for the increased risk.
9. Impact of DDEP on the Bond Market in Ghana: As of my last update in September 2021,
I do not have information on a financial term or regulation referred to as "DDEP" that
directly affects the bond market in Ghana. It's possible that this term might have emerged
or been introduced after my last update, or it might be a specific regional or industry
term. For accurate information on the DDEP and its impact on the bond market in Ghana,
I recommend referring to the latest financial and regulatory sources.
10. Techniques to Value Stocks: a. Dividend Discount Model (DDM): Estimates the present
value of expected future dividends to determine the stock's intrinsic value.
b. Price-Earnings (P/E) Ratio: Divides the stock's current price by its earnings per share (EPS) to
gauge its relative value.
c. Discounted Cash Flow (DCF) Analysis: Projects the company's future cash flows and
discounts them back to the present value using a suitable discount rate.
d. Comparable Company Analysis (CCA): Compares the stock's valuation to similar companies
in the industry to assess its relative value.
e. Net Asset Value (NAV): Calculates the value of the company's assets minus liabilities to
determine the stock's value.