Page 198 - CAPE Financial Services Syllabus Macmillan_Neat

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02269020/CAPE/KMS 2016 SPEC

FINANCIAL SERVICES STUDIES

UNIT 2 - PAPER 02

KEY AND MARK SCHEME

1. (a) Financial institutions:

- commercial banks
- investment banks
- building societies
- credit unions

1 mark for each up to a maximum of 4 marks

(b) Careers in Financial Services:

- analysts
- brokers
- wealth manager
- financial advisors
- bank managers

1 mark for each up to a maximum of 3 marks

(c) Meaning of terms:

(i) Financial derivatives are financial instruments that
(ii) are linked to a specific financial instrument or
(iii) indicator or commodity, and through which specific
financial risks can be traded in financial markets in
(iv) their own right
(v) a credit derivative consists of privately held
negotiable bilateral contracts that allow users to
manage their exposure to credit risk.
a type of option that derives its value from the
difference between the prices of two or more assets.
Spread options can be written on all types of financial
products including equities, bonds, and currencies.
This type of position can be purchased on large
exchanges.
forward contracts are private agreements between two
parties and are not as rigid in their stated terms and
conditions. Because forward contracts are private
agreements, there is always a chance that a party may
default on its side of the agreement.
Future contracts are standardized instrument traded on
an exchange, it is an instrument agreed now that give
the holder the right AND obligation to buy or sell a
commodity in the future at an agreed price

2 marks for complete response at (c)(i)
1 mark each for responses (ii) to (v)