May 21, 2022

MAASAI MARA UNIVERSITY REGULAR UNIVERSITY EXAMINATIONS 2018/2019 ACADEMIC YEAR THIRD YEAR FIRST SEMESTER SCHOOL OF BUSINESS AND ECONOMICS BACHELOR OF SCIENCE IN FINANCIAL ECONOMICS COURSE CODE: ECO 3111 COURSE TITLE: THEORY OF FINANCE DATE:7TH DECEMBER 2018 TIME: 11.00AM -1.00PM INSTRUCTIONS TO CANDIDATES Answer Question ONE and any other THREE questions This paper consists of 4 printed pages. Please turn over. ECO 3111: Theory of Finance Page 2 QUESTION ONE (a). Use examples and illustrations explain eight principals of finance. (8mks) (b). Make-Em happy Corp. (MEH) has a different security for sale. You pay MEH Kshs 1000 today and the company will give you back Kshs 100 at the end of the first year, sh 200 at the end of year 2…….. Kshs 1000 at the end of year 10. (i). Calculate the internal rate of returns of this investment. (5mks) (ii). Show an amortization table for the investment. (5mks) (c). Explain the following concepts as used in theory of finance. (7mks) (i). Net present value (ii). Effective annual interest rate (iii). Capital market line (CML) (iv). Stock market line. (SML) (v). Risk-adjusted discount rate. (RADR) (vi). Weighted average cost of capital. (WACC) (vii). Marginal rate of time preference. QUESTION TWO (a). Explain how a financial intermediary reduces the cost of contracting and information processing. (3mks) (b). Your firm is considering two projects with the following cash flows. Year project A project B 0 _____________ -500 ____________ -500 1 _____________ 167 ____________ 200 2 _____________ 180 ____________ 250 3 _____________ 160 _____________ 170 4 _____________ 100 _____________ 25 5 _____________ 100 _____________ 30 (i). If the appropriate discount rate is 12% rank the two projects. (3mks) (ii). Which project is preferred if you rank by IRR? (2mks) ECO 3111: Theory of Finance Page 3 (iii). Calculate the crossover rate and discount rate in which the NPVs of both projects are equal. (3mks) (iv). Should you use NPV or IRP to choose between the two projects? Give brief discussion. (4mks) QUESTION THREE (a). The XYZ company limited has the following information. Market value of debt Kshs 2,500,000 Market value of equityKshs 1,000,000 Cost of debt,rD 5% Tax rate, Tc 25% WACC 10% Calculate the cost of equity rE. (5mks) (b). A boudy corp’s stock price is currently Kshs 22 per share. The company has paid a dividend of ksh. 0.55 per share and shareholders anticipate that this dividends will grow in the future at rate of 6% per year. Use the Gordon model to calculate the company’s cost of equity rE. (4mks) (c). Explain the risk associated with the mortgage origination process. (3mks) (d). Explain the key features of an option market. (3mks) QUESTION FOUR (a). Explain the difference between a spot exchange rate and a forward exchange rate. (3mks) (b). The following are the spot exchange rates reported on July 24,2018: Japanese yen British pound Canadian dollar US $ 0.008864 1.477 0.6596 The exchange rate indicate the number of US dollar necessary to purchase one unit of the foreign currency (i). From the perspective of a US investor, explain whether the preceding foreign exchange rates are direct or indirect. (3mks) ECO 3111: Theory of Finance Page 4 (ii). How much of each of the foreign currencies is needed to buy one US dollar? (3mks) (iii). Calculate the theoretical cross rates. (3mks) (c). The assumptions underlying the Miller-Modigliani (MM) dividend irrelevance hypothesis are unrealistic. Discuss with illustrations and examples. (3mks). QUESTION FIVE (a). Explain the difference between the primary and the secondary markets (4mks) (b). Use the Black-Scholes model to price the following: (i). A call option on a stock whose current price is s=50, with exercise price x=50, T=0.5, r=10%, and δ=25%. (4mks) (ii). A put option with same parameters. (2mks) (c). Explain the main source of capital and their limitations. (5mks)

MAASAI MARA UNIVERSITY REGULAR UNIVERSITY EXAMINATIONS 2018/2019 ACADEMIC YEAR THIRD YEAR FIRST SEMESTER SCHOOL OF BUSINESS AND ECONOMICS BACHELOR IN SCIENCE IN FINANCIAL ECONOMICS COURSE CODE: ECO 3110 COURSE TITLE: CORPORATE FINANCE DATE: 3RD DECEMBER 2018 TIME: 11.00- 1.00PM INSTRUCTIONS TO CANDIDATES 1. Answer Question ONE and any other THREE questions 2. Question one is compulsory and it carries 25 marks other questions are 15 marks each This paper consists of four printed pages. Please turn over. QUESTION ONE a) Discuss how agency theory explains the relationship between the management and shareholders of a corporation. (5 marks) (b) How is wealth maximization as a goal of the corporate firm consistent with agency theory? (6 marks) (c)Is it true under agency theory that a corporate manager will always undertake projects with positive net present value, under conditions of no capital rationing? Explain. (6 marks) d) Consider two investments, A and B each having the following investment characteristics; Compute the expected return of a portfolio of the two assets. (4 marks) d) Differentiate between bonds and debentures. (4 marks) QUESTION TWO a) Discuss five factors to be considered when making capital structure decisions (5 marks) b) Bidii limited has a cost of capital of 10%. The company currently has 250,000 shares outstanding and selling on the stock exchange at sh 120 per share. The companys earning per share is sh.10 and intends to maintain a dividend payout ratio of 50% at the end of the current financial year. The companys expected income for the current year is sh. 3million and the available investment proposals are estimated at cost sh. 6 million. Required: Using the Modigliani and Miller model, show that the payment of dividends does not affect the value of the firm. (10 marks) QUESTION THREE Companies U and L are identical in every respect except that U is unlevered while L has Sh 10 million of 5% bonds outstanding. Assume (a) That all of the MM assumptions are met (b) That there are no corporate or personal taxes (c) That EBIT is Sh 2 million (d) That the cost of equity to company U is 10% Required: i) Determine the value MM would estimate for each firm (4 marks) ii) Determine the cost of equity for both firms (4 marks) iii) What is the overall cost of capital for both firms? (3 marks) iv)Suppose the value of U is Sh 20 million and that of L is Sh 22 million. Explain the arbitrage process for a shareholder who owns 10% of company L’s shares. (4 marks) QUESTION FOUR a) Define the word time value of money and describe its relevance in finance (3 marks) b) Suppose you want to buy a house in 5 years from now and estimate that the initial down payment of Sh. 2 million will be required at that time. You wish to make equal annual end of year deposits in an account paying annual interest of 6%. Determine the size of the annual deposit. (6 marks) c) Discuss three legal procedures that one firm can use to acquire another firm (6 marks) QUESTION FIVE Bhasmati Rise Company is considering two mutually exclusive projects requiring an initial outlay of shs. 100,000 each and with a useful life of 5 years. The company required rate of return is 10% and the appropriate corporate tax rate is 50%. The project will be depreciated on a straight line basis. Before taxes and depreciation cash flows expected from the projects are as below: Year 1 2 3 4 5 Project I shs. 40000 40000 40000 40000 40000 Project 2 shs. 60000 30000 20000 50000 50000 Required a) Compute the after tax cash flows of both projects. ( 3 Marks) b) Calculate for each project i) Net present value (5 marks) ii) Internal Rate of Return (5 marks) iii)Which project should be accepted and why (2 marks

MAASAI MARA UNIVERSITY REGULAR UNIVERSITY EXAMINATIONS 2018/2019 ACADEMIC YEAR THIRD YEAR FIRST SEMESTER SCHOOL OF BUSINESS AND ECONOMICS BACHELOR OF SCIENCE IN ECONOMICS COURSE CODE: ECO 3109 COURSE TITLE: DEMOGRAPHIC ECONOMICS DATE: 13TH DECEMBER 2018 TIME: 8.30 -10.30AM INSTRUCTIONS TO CANDIDATES Answer Question ONE and any other THREE questions This paper consists of 3 printed pages. Please turn over. QUESTION ONE a) i) Discuss the theory of demographic transition. (5marks) ii). Explain with example and illustration which stage Kenya in the demographic transition seems to be (3marks) b) Explain the relationship between a Lorenz curve and Gini coefficient (3marks) c) Discuss the essential assumptions and features of Lewis –Fei-Ranis surplus labour model. (5marks) d) Explain the relationship between the age structure of a population and its dependency burden. (5marks) e) Discuss the optimum theory of population. (4marks) QUESTION TWO a) i) Discuss the coale-Hoover thesis about adverse effects of population growth on savings and capital formation. (4marks) ii) On what grounds should this thesis be rejected? (3marks) b) i) Describe the classical flexible wages model of employment determination. (3 marks) ii) What way can this model be said there never be unemployment? (2 marks) c) Discuss the concept of optimal amount of inequality. (3marks) QUESTION THREE a) Explain why many economists blame minimum wage law for much of employment problems of youth. (4marks) b) Discuss three distinct conceptualizations of the likely response to population according to Bilshorrow (1987). (3marks) c) i) Explain the Malthusian theory of population trap. (5marks) ii) Is this theory applicable to Kenyan population? (3marks) QUESTION FOUR (a) Explain the factors that cause the international migration of high level of educated manpower from less developed counties to developed counties. (5marks) b) Explain how the so-called household or micro-economics of fertility relates to the theory of consumer choice. (4marks) c) i) Explain the concept of hidden momentum of population growth. (3marks) ii) Discuss how this concept is important for projecting future population trends in different third world countries. (3marks) QUESTION FIVE a) Explain economic and social policies the governments of developing and developed countries and international assistance agencies might consider to bring about a reduction in overall rates of world population growth. (6marks) b) Explain the following concepts as used in demographic economics (6marks) i. Crude death rate ii. Replacement fertility iii. Infant mortality rate iv. Doubling time v. Population policies vi. Overlapping generation models c) Discuss conditions necessary for economic growth to translate into improvements in the quality of life. (3marks)

MAASAI MARA UNIVERSITY REGULAR UNIVERSITY EXAMINATIONS 2018/2019 ACADEMIC YEAR FIRST YEAR FIRST SEMESTER SCHOOL OF BUSINESS AND ECONOMICS BACHELOR OF SCIENCE (ECONOMICS) BACHELOR OF SCIENCE (FINANCIAL ECONOMICS) BACHELOR OF SCIENCE (ECONOMICS AND STATISTICS) COURSE CODE: ECO 3107 COURSE TITLE: OPERATIONS RESEARCH DATE: 14TH DECEMBER, 2018 TIME: 1100 – 1300HRS INSTRUCTIONS TO CANDIDATES Answer Question ONE and any other THREE questions This paper consists of 6 printed pages. Please turn over. ECO 3107: Operations Research Page 2 QUESTION ONE (25 MARKS) (a)Explain what you understand by the term Operations Research and give its main objective. (3 marks) (b) Develop a general mathematical formulation of Linear Programming problem clearly stating your variables and coefficients (4 marks) (c) Company X prepares and packages three Christmas gift packages containing sausages and cheese. The Tasters delight gift package contains 3 sausages and 6 cheeses. The succulent delight contains 5 sausages and 4 cheeses. The Gourment delight package contains 6 sausages and 5 cheeses. The company has 2500 sausages and 3000 cheeses available for packaging; and it believes that all gift packages can be sold (based on previous demand). Profits are estimated at ksh 2.50 for the Taster delight gift package, ksh3.50 and ksh4.00 for the Gourment delight gift package. Required: Formulate this problem as a Linear Programming Problem (3 marks) (d) Given the problem below Diagrammatically, determine the optimal solution (5 marks) (e ) Solve the following Linear Programming problem using the Simplex Method QUESTION TWO ( 15 MARKS) a)State Bellman’s principle of optimality as applied to Dynamic programming ( 5 marks) b) Mary lives in New York City but she plans to drive to Los Angeles to seek fame and fortune. Mary’s funds are limited, so she has decided to spend each night on of her trip at a friend’s house. Mary has friends in Columbus, Nashville, Louisville, Kansas City, Omaha, Dallas, San Antonio and Denver. Mary knows that after one day’s drive she can reach Columbus, Nashville or Louisville. After two days of driving, she can reach Kansas City, Omaha or Dallas. After three days of driving she can reach San Antonio or Denver. Finally after four days of driving she can reach Los Angeles. Given the actual road distance between cities as below, determine where Mary should spend each night of the trip in order to minimize the distance (kms) travelled using Forward Recursion Approach. (10 marks) c) A seven tin vessel is loaded with one or more of four items. The table below gives the unit weight in tons, unit price in thousands of Kenya shillings for each of item i. Using the backward recursion procedure, determine how the vessel should be loaded to minimize total revenue (vi), given vi=wipi (10 marks) QUESTION THREE ( 15 MARKS) (a ) Clearly explaining your variables and constants develop a tabular formulation of a general Transportation problem. (5 marks) (c ) Given the transportation problem below Determine the feasible solution using the Vogels Approximation Method (10 marks) ECO 3107: Operations Research Page 5 QUESTION FOUR – ( 15 MARKS) A project of building a backyard swimming pool consist of nine major activities. The activities and their immediate predecessors, time estimates (in days) for this project are given as below Required; (a)Draw the network + (2 marks) (b) Determine the critical path activities (2 marks) (c)Find the estimate of the variance of each activity (3 marks) (d) Determine the expected time to complete the project. (4 marks) (e)Find the probability that the project can be completed in not more than 25 working days. (4 marks) QUESTION FIVE ( 15 MARKS) a)A supplier of the university has introduced Quantity discount to encourage the university to make large orders. The price schedule of the supplier is as below; ECO 3107: Operations Research Page 6 The university has approached you as a management science specialist to investigate this order and advice accordingly. The university has the option of receiving this order (the annual order) all at once or gradually over time In your preliminary investigations you have established the following estimates; i. The university’s annual demand for product X is estimated at ksh3000. ii. The cost of placing and receiving the order is ksh 5/ per order. iii. Stock holding cost is 20% of the acquisition cost. iv. The university uses product X out of inventory at the rate of 40 units per day. v. When orders are delivered gradually , the supplier can do so at the rate of 100 units per day Required; a)Using well labeled diagram determine the Economic Order Quantity for each of the options (gradual delivery and delivery all at once. (10 marks) b)Comparing the two options advice the university on the best option to take clearly justifying your answer (5 marks)

MAASAI MARA UNIVERSITY REGULAR UNIVERSITY EXAMINATIONS 2018/2019 ACADEMIC YEAR THIRD YEAR FIRST SEMESTER SCHOOL OF BUSINESS AND ECONOMICS BACHELOR OF SCIENCE IN ECONOMICS BACHELOR OF SCIENCE IN FINACIAL ECONOMICS COURSE CODE: ECO 3106 COURSE TITLE: ECONOMICS OF LABOUR AND INDUSTRY DATE: 5TH DECEMBER 2018 TIME: 8.30 -10.30 A.M INSTRUCTIONS TO CANDIDATES Answer Question ONE and any other THREE questions This paper consists of 3 printed pages. Please turn over. ECO 3106: Economics of Labour & Industry Page 2 QUESTION ONE (a). Explain the concept production function. (3mks) (b). Differentiate between economy of scale and economy of scope. (4mks) (c). The Economic Planning Department at International chemicals, Inc. has used regression analysis to estimate the firm’s production function as: InQ= 3+0.25 InK + 0.75 InL where “In” denotes natural logarithm of the variable. (i). If the capital stock is fixed at 16, the price of labour is Kshs 200 per unit, and the price of the firm’s only product, sulphuric acid, is Kshs 10 per unit, determine the rate of labour input that will Maximize profit. (4mks) (ii). If both the capital and labour units are variable the price of labour in kshs 200 per unit and the price of capital is Kshs 100 per unit, determine the input rates for both capital and labour that will Maximize profit. (5mks) (d). Describe factors that influence aggregate labour demand in the economy. (4mks) (e). Explain the following concepts as used in labour economics. (5mks) (i). Voluntary unemployment (ii). Sticky wages. (iii). Involuntary unemployment. (iv). Minimum wages. (v). Allocative efficiency QUESTION TWO (a). A team representing of all firms in the automatic widget industry is currently negotiating a new three- year contract with the leaders of the united widget workers labour union. The industry demand function for labour (i.e. the marginal revenue product of labour) is MRPL= 20-2L The marginal revenue function associated the demand curve is MR=20-4L and the labour supply and marginal expenditure on input functions facing the industry are W=5+2L ME=5+ 4L Where L is the number of workers in thousands and W is the hourly wage rate. ECO 3106: Economics of Labour & Industry Page 3 (i). If the management team can dominate the negotiations and dictate the terms of agreement, Calculate wage rate and level of employment determination. (4mks) (ii). If the labour union team can dominate the negotiations and dictate the terms of agreement, find the wage and employment (4mks) (b). Explain modern theory of wages. Use examples for illustrations. (4mks) (c). Explain the main objectives of trade unions in less developed economies. (3mks) QUESTION THREE (a). (i). Differentiate between nominal wages and real wages. (3mks) (ii). Explain factors that determine real wages. (4mks) (b). Explain the following theories of wages. (5mks) (i). Subsistence (ii). The residual demand. (iii). The wage fund. (c). Discuss the case for the government involvement in labour markets. (3marks) QUESTION FOUR (a). Critically explain the argument that perfect competition in the most desirable market structure. (4mks) (b). Discuss the advantages and disadvantages of internal labour markets. (4mks) (c). If the labour demand and labour supply intersect above the negotiated wage rate. Explain the implications for the aggregate supply (AS) curve. (4mks) (d). Explain the cost of unemployment to the economy. (3mks) QUESTION FIVE (a). Explain the causes of backward sloping of labour supply curve. (5mks) (b). Use diagrams to explain labour exploitation in the following markets. (6mks) (i). Monopolistic. (ii). Monopsony. (c). Discuss policy measures adopted by the government to reduce labour exploitation. (4mks)

MAASAI MARA UNIVERSITY REGULAR UNIVERSITY EXAMINATIONS 2018/2019 ACADEMIC YEAR THIRD YEAR FIRST SEMESTER SCHOOL OF BUSINESS AND ECONOMICS BACHELOR OF SCIENCE INECONOMICS BACHELOR OF SCIENCE IN FINANCIAL ECONOMICS BACHELOR OF SCIENCE IN ECONOMICS AND STATISTICS BACHELOR OF SCIENCE IN AGRICULTURAL ECONOMICS AND RESOURCE MANAGEMENT BACHELOR OF AGRIBUSINESS MANAGEMENT COURSE CODE: ECO 3105 COURSE TITLE: DEVELOPMENT ECONOMICS DATE: 13TH DECEMBER 2018 TIME: 11.00AM – 13.00PM INSTRUCTIONS TO CANDIDATES Answer Question ONE and any other THREE questions This paper consists of 2 printed pages. Please turn over. QUESTION ONE a) With reference to a country of your choice drawn from Asia, Latin America or Africa, using the internal and external barriers to development, discuss the fundamental structural changes that the country would have to undertake for substantial progress to be made. (15 Marks) b) Explain the relationship between debt overhang and economic growth. (5 Marks) c) Explain why increased savings and investment are perceived as necessary but not sufficient conditions for economic growth. (5 Marks) QUESTION TWO (a) Explain the four key elements of dualistic –development thesis. (5Marks) (b) Discuss any five Sustainable Development Goals. (10 marks) QUESTION THREE (a) With reference to Kenya Vision 2030, discuss the concept of leading sectors. (10 Marks) (b) Discuss reasons why donors and recipient countries give and receive Aid. (5 Marks) QUESTION FOUR Explain the essential distinctions among the stages of growth theory of development, the structural change models and the theory of international dependence, which model do you think provide the best explanation of the situation in Kenya? Explain your answer. (15 Marks) QUESTION FIVE a) Economic growth and development definitely requires a break with the past. Discuss with reference to structural transformation. (8 Marks) b) Widespread poverty, high unemployment, and growing income inequality make Kenya a country of economic as well as geographic diversity. Discuss (7 Marks)

MAASAI MARA UNIVERSITY REGULAR UNIVERSITY EXAMINATIONS 2018/2019 ACADEMIC YEAR THIRD YEAR FIRST SEMESTER SCHOOL OF BUSINESS AND ECONOMICS BACHELOR OF SCIENCE IN ECONOMICS/ECONOMICS AND STATISTICS/FINANCIAL ECONOMICS COURSE CODE: ECO 3104 COURSE TITLE: INTERNATIONAL ECONOMICS I DATE: 11TH DECEMBER, 2018 TIME: 0830 – 1030 HRS INSTRUCTIONS TO CANDIDATES Answer Question ONE and any other THREE questions This paper consists of TWO printed pages. Please turn over. ECO 3104 – International Economics I QUESTION ONE (a)While the H-O model can explain Brazil’s world leadership in producing steel and sugar, it does not explain Japan’s leadership in producing automobiles (vehicles). Discuss this statement in relation to H-O theory and current trade patterns. (10marks) (b) Using graphs show how community indifference curves or marginal rate of substitution represent aggregate tastes or preferences of society, which in turn send signals to producers of goods and services in a country. (7marks) (c)Discuss the weaknesses in mercantilism doctrine that David Hume identified that laid basis for free trade (8marks) QUESTION TWO (a)Explain how mercantilists achieved their objectives (8marks) (b) What are the six assumptions of the Ricardian model and explain what each assumption implies. (7marks) QUESTION THREE (a)Use graphs to show how, from a point of specialization, country A can transform its production of good Y into good X through domestic production and trade the surplus good X with supplies of good Y from country B. (8marks) (b) Explain the two main sources of gains from trade that allow both country A and B to be better off with trade. (7marks) QUESTION FOUR (a)Use consumer tastes as a major factor in influencing trade patterns to show deficiencies in H-O theory (8marks) (b) Explain the product cycle theory and show how Vernon arrived at his conclusion for his theory (7marks) QUESTION FIVE (a)Import substitution industrial has failed as economic development option for developing countries. Discuss. (9marks) (b) Explain the disadvantages Kenya may suffer by joining the East African Cooperation (6marks)

MAASAI MARA UNIVERSITY REGULAR UNIVERSITY EXAMINATIONS 2018/2019 ACADEMIC YEAR FOURTH YEAR FIRST SEMESTER SCHOOL OF BUSINESS & ECONOMICS BACHELOR OF SCIENCE IN ECONOMICS BACHELOR OF SCIENCE IN FINANCIALECONOMICS BACHELOR OF SCIENCE IN ECONOMICS & STATISTICS COURSE CODE: ECO 3103 COURSE TITLE:ADVANCED MICROECONOMICS DATE: 6TH DECEMBER 2018 TIME: 0830 – 1030HRS INSTRUCTIONS TO CANDIDATES Answer Question ONE and any other THREE questions This paper consists of three printed pages. Please turn over. QUESTION ONE (a) Using game theoretic approach and given that the inverse demand function is P=a-qA+qB . (i) Show that a firm that first enters the market will always have a larger markets share. (4marks) (ii) What is the market price? (2marks) (iii) What is the profit for the leader and follower? (2marks) (iv) What is the industry profit? (1mark) (v) What assumption have you made in (i) above? (2marks) (b) (i) Show that trade in a perfectly competitive market will always be a market Pareto efficient. (6marks) (ii) Discuss the second theorem of welfare economics (4marks) ( iii) What are the policy implications of the second theorem of welfare economies (4marks) QUESTION TWO (a) Prove that expenditure functions are concave in price. (3marks) (b) Given a Cobb-Douglas utility function u(x1x2)=x1 0.5×2 0.5. (i) Determine the Marshallian demand functions. (4marks) (ii) The Hicksian demand functions. (4marks) (b) Determine the Slutsky equation. (4marks) QUESTION THREE (a) Show that the effect of an income tax that raises same amount of revenue as exercise tax will always achieve a higher level of utility than excise tax. (5marks) (b) Suppose initially a consumer has an income M0=100 and faces the following prices of good x1 and x2: P1 0=P2 0=1, and e(p,u)= P1 0.5P2 0.5U. If the government imposes a tax on the good x1 so that P1 rises to P1 1=4. What amount of additional income would be needed to compensate the consumer so that he remains on the same level of utility as before the imposition of the tax? (4marks) (c) “Asymmetric information is considered to be one of the causes of market failure”. Using a relevant example, Discuss. (6marks) QUESTION FOUR (a) By an illustration, discuss the tragedy of the commons. (4marks) (b) Distinguish between adverse selection and moral hazard (4marks) (c) A risk-averse individual is offered a choice between a gamble that pays Sh1000 with a probability of 25% and Sh100 with a probability of 75%, or a payment of Sh325. Which would he choose? (3marks) (d) Draw a utility function that exhibits risk-loving behavior for small gambles and risk-averse behavior for large gamble. (4marks) QUESTION FIVE (a) Given a cost function C(w,y)=2W1 0.5W2 0.5Y0.5. (i) Determine the conditional input demand functions. (2marks) (ii) Input demand function. (2marks) (iii) Output supply function. (1marks) (iv) Associated output function. (1mark) (b)Find the cost function C(w,y), given that Y=min{x1/a1, x2/a2}. (3marks) (c) Explain the concept of signaling. (3marks) (d) If a stock has a β of 1.5, the return on the market is 10%, and the risk free rate of return is 5%, what expected rate of the return should this stock offer according to the capital asset pricing model? (3marks)

MAASAI MARA UNIVERSITY REGULAR UNIVERSITY EXAMINATIONS 2018/2019 ACADEMIC YEAR THIRD YEAR FIRST SEMESTER SCHOOL OF BUSINESS AND ECONOMICS BACHELOR OF AGRIBUSINESS MANAGEMENT COURSE CODE: ECO 2205 COURSE TITLE: ECONOMICS OF MONEY AND BANKING DATE: 11TH DECEMBER, 2018 TIME: 0830 – 1030 HRS INSTRUCTIONS TO CANDIDATES Answer Question ONE and any other THREE questions This paper consists of 3 printed pages. Please turn over. QUESTION ONE a). The income elasticity of money demand is 2 /3 and the interest elasticity of money demand is -0.1. Real income is expected to grow by 4.5% over the next year, and the real interest rate is expected to remain constant over the next year. The rate of inflation has been zero for several years. i. If the central bank wants zero inflation over the next year, find what growth rate of the nominal money supply it should choose. (4 marks) ii. Calculate how much velocity will change over the next year if the central bank follows the policy that achieves zero inflation. (3marks) b) i. Define the concept money. (3marks) ii. How does economist’s use of this differ from its everyday meaning? (3marks) c) Explain the objectives of money in less developed economies. Use examples and illustrations (5marks) d) Differentiate between beater transaction and money transaction systems. (4marks) e) Discuss the role of velocity in the quantity theory of money. (3marks) QUESTION TWO a) Explain factors responsible for banking crises in third world economies. (3marks) b) Explain the neutrality of money concept. (3marks) c) Discuss three major policy instruments adopted by central bank to control money supply. (3marks) d) Explain the evolution of money policy in developing economies. (3marks) e) Discuss the components of money. (3marks) QUESTION THREE a) Use examples and illustrations to explain the process of credit creation in banks. (4marks) b) Discuss the macro-economic variables that affect the aggregate demand for demand. (4 marks) c) Explain the relationship between the price level and the nominal money supply when all markets are in equilibrium. (4 marks) d) Discuss how actions of the public and banks can cause the money multiplier to rise or fall. (3marks) QUESTION FOUR a) Explain the role of financial intermediaries in less developed economies. (4marks) b) When the real interest rate increases, banks have an incentive to lend a greater portion of their deposits, which reduces reserve-deposit ratio. In particular, suppose that res=0.4-2r Where res is the reserve-deposit and r is the real interest rate. The currencydeposit ration is 0.4. the price level is fixed at 1.0 and the monetary base is 60. The real quantity of money demanded is L(Y,i) =0.5Y – 10i, Where Y is real output and i is the nominal interest rates. Assume that expected inflation is zero so that the nominal interest rate and real interest rate are equal. If r=i=0.10 Find: i. The reserve-deposit ratio. (2marks) ii. The money multiplier (2marks) iii. The money supply (2marks) iv. What real output Y clears the asset market. (2marks) c) Describe the characteristics necessary for use of any commodity mark over a long period. (3 marks) QUESTION FIVE a) Explain how interest rates are determined under the following approaches i. Classical (3marks) ii. Keynesian. (3marks) b) Explain the following concepts as used in economics of money and banking i. Monetary transmission mechanism (2marks) ii. Intermediate target (1mark) iii. Fractional reserve banking (2marks) iv. High powered money (1mark) v. Liquidity trap (1mark) c) Explain three functions of money. (2marks)

MAASAI MARA UNIVERSITY REGULAR UNIVERSITY EXAMINATIONS 2018/2019 ACADEMIC YEAR SECOND YEAR, FIRST SEMESTER SCHOOL OF BUSINESS AND ECONOMICS BSC. AGRICULTURAL ECONOMICS AND RESOURCE MANAGEMENT COURSE CODE: ECO 2204 COURSE TITLE: MATHEMATICS FOR ECONOMISTS II DATE: 11TH DECEMBER, 2018 TIME: 1100 – 1300 HRS INSTRUCTIONS TO CANDIDATES Answer Question ONE and any other THREE questions This paper consists of 4 printed pages. Please turn over. QUESTION ONE a) Find the derivatives of y with respect to x: QUESTION TWO a) Given Demand and Supply functions in a one-commodity market model as: QUESTION THREE a) Wijenje has the following maize production function Where Q is the quantity of maize produced while K and L are units of inputs capital and labour respectively. Supposing that the prices of K and L are Ksh 20 and Ksh. 40 respectively, and that he has a total of Ksh. 5000 to spend on the two inputs: i. Using Lagrangean optimization technique determine the values of λ, K and L at profit maximization level ii. What will be Wijenje’s maximum profit iii. Using bordered Hessian matrix, confirm that the critical values present a maximum (15 marks) QUESTION FOUR a) Noellene is a price discriminating monopolist having the following functions for her milk production firm: Determine the prices and quantities for the milk in the two different markets (9 marks) b) The following demand and supply functions were extracted from a perfectly competitive market Q supply function Determine Producer Surplus and Consumer Surplus at equilibrium (6 marks) QUESTION FIVE a) What is the usefulness of the Lagrangean multiplier in mathematical optimization (3 marks) b) Faith has a mango firm in Kitui in which she has an objective of: i. Compute the values of x, y and λ at profit maximization point (10 marks) ii. What will be Faith’s profit (2 marks)

MAASAI MARA UNIVERSITY REGULAR UNIVERSITY EXAMINATIONS 2018/2019 ACADEMIC YEAR SECOND YEAR SECOND SEMESTER SCHOOL OF BUSINESS & ECONOMICS BACHELOR OF SCIENCE INECONOMICS BACHELOR OF SCIENCE IN FINANCIALECONOMICS BACHELOR OF SCIENCE IN ECONOMICS AND STATISTICS COURSE CODE: ECO 2107 COURSE TITLE: HISTORY OF ECONOMIC THOUGHT I DATE: 10TH DECEMBER 2018 TIME: 0830 – 1030 HOURS INSTRUCTIONS TO CANDIDATES Answer Question ONE and any other THREE questions This paper consists of 2 printed pages. Please turn over. QUESTION ONE (a)Alfred Marshall favored partial equilibrium over general equilibrium analysis. Discuss his key contributions to economic analysis. (6mks) (b) Compare and contrast classical and marxian political economies. (15mks) (c)Explain David Ricardo’s contribution to theory of rent. (4mks) QUESTION TWO (a) Discuss the contributions of the ancient Greek to development of economic thought. ( 5 mks) (b) Discuss the contributions of the mercantilists to economic theory. (10mks) QUESTION THREE Compare and contrast the ideas of Menger, Jevons and Walras, the three economists who are credited with initiating the marginal revolution in economics. (15 mks) QUESTION FOUR (a)Differentiate between preventive and positive checks as explained by Robert Malthus in his theory of Population. (6mks) (b) Discuss Say’s law of markets. (5mks) (c)Explain the main economic thought of physiocracy. (5mks) QUESTION FIVE (a)Adam Smith argues that laissez- faire, invisible hand of markets and theory of value are a critical component in a nations wealth creation. Discuss. (8mks) (b) Discuss John Stuart Mill’s economic ideas on production and distribution . (7mks)

MAASAI MARA UNIVERSITY REGULAR UNIVERSITY EXAMINATIONS 2018/2019 ACADEMIC YEAR SECOND YEAR FIRSTSEMESTER SCHOOL OF BUSINESS AND ECONOMICS BSC. ECONOMICS/BSC. FINANCIAL ECONOMICS/BSC. ECONOMICS AND STATISTICS BACHELOR OF SCIENCE IN ECONOMICS COURSE CODE: ECO 2106 COURSE TITLE:CALCULUS FOR ECONOMISTS I DATE: 7TH DECEMBER, 2018 TIME: 8.30 – 10.30 A.M INSTRUCTIONS TO CANDIDATES Answer ALL questions in Section A and ANY Other THREE questions from Section B DO NOT MAKE ANY WRITING ON THIS QUESTION PAPER This paper consists of THREE printed pages. Please turn over. SECTION A (25 MARKS) Question one (25 Marks) Question three (15 Marks i. Write down an expression for the marginal revenue function, MR (2 Marks) ii. If the current demand is 70 estimate the change in the value of TR due to a 3-unit increase in Q(3 Marks) Question four (15 Marks) a. Determine the elasticity of demand when the price falls from 136 to 119 Question five (15 Marks) a. Differentiate the following functions SECTION B (45 MARKS) Question two (15 Marks) c. If the total revenue function, TR of a good is given by 100𝑄 − 𝑄 i. Write down an expression for the marginal revenue function, MR (2 Marks) ii. If the current demand is 70 estimate the change in the value of TR due to a 3-unit increase in Q(3 Marks)