Question 1 a) There have been arguments on the relevance or otherwise of financial institutions in most economies. Some have argued about the irrelevance of financial institutions and the profit rip-off they make from people. In Ghana, the recent banking crises gave reason to this argument of irrelevance to the financial institutions. However, there is the other side that support the existence of financial institutions. They argue that in the conduct of business, financial market participants such as lenders and borrowers need each other for business. This has been known to be a cumbersome task in the absence of financial institutions. Arguing for the latter group, carefully evaluate the importance of financial institutions in the financial space in bridging the gap between excess fund holders and fund seekers. EV (5) b) For the reasons of mitigating the risks of holding cash on hand, savers of funds often seek to transfer risks of holding the funds to financial institutions who take these funds as deposits and further give it out as loans to those in need of funds. Financial institutions face the risks of changes of interest rates in the financial markets. This definitely affects the expense and income the financial institutions make on their liabilities (deposits) and assets (loans) respectively. Again, the differences between time of maturities between the assets and liabilities of the financial institutions pose a risk of the institutions not being able to reinvest or refinance the investments. Per your understanding of the Asset and Liability Management of banks carefully evaluate these risks. CR (7) c) The effects of COVID19 were seen s very devastating. Businesses were shut down because production lines as well as credit lines were shut. Several efforts have been made by the government to alleviate the adverse effect of the pandemic. These included aids and grants to business startups. The central bank as well have aided business indirectly. As discussed in class, the central bank, plays a crucial role in interest rates determination. Assert the veracity of this statement given your understanding of interest rates. AP (8) TOTAL (20 MARKS