(a)Differentiate between symmetric and asymmetric information. [5… (a)Differentiate between symmetric and asymmetric information. [5 marks] (b) How can the existence of asymmetric information provide a rationale for government regulation of financial markets? [10 marks] (c) Rich people often worry that others will seek to marry them only for their money. Is this a problem of adverse selection? [5 marks] (d) How do the concept of moral hazard and adverse selection impact on the Insurance Market in Mauritius? [10 marks] (e) Using relevant diagrams, explain the effect of information asymmetry on the determination of loan interest. [10 marks] Global Board of Trade Ltd. (GBOT) started trading on 18th October, 2010. GBOT offers a basket of commodities and currency derivative products, including a global first for African currencies, on its platform regulated by Financial Services Commission (FSC), Mauritius. It offers trading in Gold and Silver futures as well as USD/MUR, ZAR/USD, EUR/USD, GBP/USD and JPY/USD futures. (a) Elaborate briefly on the contribution of GBOT towards the Mauritian economy. [5 marks] (b) Compare and contrast two of the most commonly traded derivatives in Mauritius. [5 marks] (c) Identify some of the factors that will influence the cost of a hedge. [5 marks] (d) Why do exchange rates fluctuate in the short run? [15 marks] (a) What are the economic functions of financial intermediaries? [10 marks] (b) How is the internet altering the traditional financial system? [10 marks] (c) What are the main causes of financial innovation? [10 marks] (a)Describe two ways in which financial intermediaries help lower transaction costs in the economy. [5 marks] (b) Comment on the form financial intermediaries might take in the future. [5 marks] (c) Why should financial intermediaries be regulated? [10 marks] (d) What form might regulation take in the future? [10 marks] Business Management Human Resource Management LAW AND MA LM432
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