BACHELOR OF MANAGEMENT WITH HONOURS

SEMESTER MAY 2021

BBPW3103

FINANCIAL MANAGEMENT 1

NO. MATRIKULASI : 941216045166001

NO. KAD PENGENALAN : 941216045166

NO. TELEFON : 0137545103

E-MEL : [email protected]

PUSAT PEMBELAJARAN : OUM MELAKA LEARNING CENTRE

 TABLE OF CONTENT

PERKARA MUKA SURAT

ASSIGNMENT 1
DESCRIPTION AND EXPLANATION OF THE 3-5
FUNCTIONS AND ROLES OF MONEY MARKET
AND CAPITAL MARKET

DISCUSSION ON HOW THE ROLES OF MONEY

MARKET AND CAPITAL MARKET CAN 6
AFFECT THE FINANCIAL MARKET IN
MALAYSIA

SUMMARY 7

ASSIGNMENT 2
INTRODUCTION OF THE SELECTED
COMMERCIAL BANKS 8-10
- CIMB BANK
- MALAYAN BANKING BERHAD
- AFFIN BANK
CALCULATION OF FUTURE VALUE OF
ANNUITY
- CIMB BANK 11-12
- MALAYAN BANKING BERHAD
- AFFIN BANK

COMPARISON OF THE TOTAL SAVINGS

12
BETWEEN THE THREE COMMERCIAL BANKS

13
SUMMARY
 FINANCIAL MANAGEMENT 1

ASSIGNMENT 1

DESCRIPTION AND EXPLANATION OF THE FUNCTIONS AND ROLES OF

MONEY MARKET AND CAPITAL MARKET

Money market assets are typically recommended as a good place to invest money which will
be required in a short amount of time, usually less than a year. Money market products
include bankers' acceptances, certificates of deposit, and commercial paper. Money was
created to help with the exchange of goods and services, as well as determining the correct
value of such goods and services. Companies require funding to expand, so they issue bonds,
stocks, or preferred shares. They are offered on the main market and then traded on the
secondary market after that. Long-term securities are issued on the capital market, while
short-term securities are issued on the money market.

i. Maintain market liquidity

Among the most significant features of the money market is to keep the economy liquid. In
the monetary policy framework, money market instruments play a crucial role. National
banks utilise these short-term assets to preserve market liquidity within acceptable limits.

ii. Self-sufficient of commercial bank

A well-developed money market allows commercial banks to become self-sufficient. When

commercial banks are short on money during a crisis, they do not need to resort to the central
bank for a higher-interest loan. They can, on the other hand, meet their necessities by
refinancing their existing money market short-term loans.

iii. Provide fund at short term

Individuals, small and large organisations, and banks all have access to the money market,
allowing them to obtain a loan quickly. By selling money market instruments, these firms can
borrow money and meet their short-term demands.

iv. Profitable investment

Commercial banks can make profitable investments in the money market with their extra
reserves. Commercial banks' principal purpose is to profit from their reserves while
simultaneously maintaining liquidity to meet depositors' irregular cash requests. Excess
reserves held by commercial banks are deposited in money market near-money assets, which
are highly liquid and short-term.

v. Utilise surplus fund

Because of procedure is more efficient and the rate of interest on these securities is smaller
than on commercial loans, institutions should obtain capital from the public rather than from
banks. These money market instruments can also be used by commercial banks to meet the
Bank Negara's minimum cash reserve ratio criteria. Money Market allows investors to sell
surplus funds while maintaining liquidity and reaping significant rewards. It simplifies the
process of putting money into investment vehicles for investors. Among the investors are
banks, non-financial organisations, and state and local governments.

Capital markets are exchanges of goods and services between buyers and sellers. Many
financial sectors across the world trade money, stocks, bonds, as well as other economic
assets. The capital market is a marketplace for long-term loans. It provides the financial
industry with affordable and flexible liquidity, as well as long- and medium-term investments
and repayments from state, local, and federal governments. The market's primary job is to
manage newly issued securities and generate new long-term capital. The net addition to the
economy's available capital stock is referred to as capital creation. It's also a significant
source of money that isn't being put to productive use. It moves financial resources from
people to the economy's capable earning region, allowing them to raise their spending. This
method permits the financial resource to get a better outcome by properly investing.

i. Capital formation

In the economy, the capital market plays a critical role in the production of capital. It satisfies
and caters to the financial needs of many sectors of the economy by timely delivering
appropriate cash. It shifts money from low-yielding sources to higher-yielding, development-
oriented ones. It invests people's savings and then lends that money to large-scale large -
scale infrastructure projects. It satisfies general fund need while also contributing to the
economy's present capital stock in this manner.

ii. Connect investors

The capital market connects people who have money but don't need it with others who do. It
redirects ideal lying resources to more productive sources, allowing it to earn revenue and
boost output. It helps consumers mobilise their savings by directing and guiding them into
profitable ventures. Investors can expect a constant stream of income and development from
these investments.

iii. Regulate security price

It helps to ensure that stock prices are predictable and stable. The securities market is closely
monitored by the capital market. It keeps a close check on everything and steers clear of any
inefficient or speculative behaviour. The funds are offered at normal and minimum interest
rates to the borrower. This contributes to the economic stability of security prices.

iv. Economic growth

It contributes to the country's economic development and growth. The capital market
accelerates the country's economic growth rate by distributing cash to diverse sectors of the
economy on a regular basis. It provides funds for the country's large-scale infrastructure
development, which would cost a lot of money. Numerous businesses use the capital market
to address their long-term finance demands. As a result, the economy's productivity improves
as infrastructure is upgraded and jobs are created.
 DISCUSSION ON HOW THE ROLES OF MONEY MARKET AND CAPITAL
MARKET CAN AFFECT THE FINANCIAL MARKET IN MALAYSIA

Malaysia's financial system is made up of the banking sector and nonbank financial
institutions. The central bank oversees the whole financial system, but among nonbank
financial institutions, only insurance companies are supervised by the central bank. The
money market, where financial institutions trade short-term cash, is crucial to Malaysia's
financial system. It is a market participant. It gives market participants access to quick cash in
times of need, as well as investment options for those with excess cash. Malaysia's money
market participants are the country's largest financial institutions, and they are driving the
country's financial system forward.

Securities dealers place a premium on operational flexibility. The central bank responded by
removing portfolio restrictions on discount houses. Government paper and Cagamas bonds
were originally expected to account for at least 75% of discount houses' investments (Ghani,
1996). Discount merchants now have the option of creating their own portfolio structure.
Discount houses need this flexibility to efficiently move from their role as liquidity managers
to that of true securities dealers. Discount houses are now allowed to invest in paper with
initial maturities of up to ten years, up from the previous limit of five years. In the previous
35 years, Malaysia's economy has undergone significant structural changes, transitioning
from a major commodity producer to a more diverse and broad-based economy with a
growing industrial base.

The most important economic changes, and also the most intense expansion of the financial
sector, have occurred in the last five years. Over the last 35 years, Malaysia's economy has
transformed from a major commodities producer to a more diversified and broad-based
economy with a growing industrial base. The last five years have seen the most significant
economic shifts, as well as the fastest-growing financial sector. This growth was largely
attributable to the successful implementation of macroeconomic goals and processes aimed at
industrialisation and modernising the economy, as well as a market-oriented, outward-
looking financial activity. Even more important was the fact that these measures were
implemented in a realistic and accessible manner, with the government's openness to change
policy. The economic change of the monetary system was carried out in concert with the
institutional makeover. This subsequent data introduced a new bank rate regime in which
market forces determined lending rates. Malaysia became one of the few financial markets in
the area with an interest rate structure that is not affected by the government as a result of this
key milestone.

SUMMARY

Malaysia's economy has risen at an annual rate of roughly 7% for the past three decades,
making it one of Southeast Asia's fastest-growing countries. This rapid growth has coincided
with a dramatic shift in the economy's structure, from one primarily reliant on a small number
of primary resources to one where manufacturing is by far the most important industry. As of
December 2019, Malaysia's economy is diversified and robust, with a capital market worth
RM 3.202 billion. According to the International Monetary Fund (IMF), global growth
slowed in 2019 as a result of global trade barriers, geopolitical concerns, and the deteriorating
economies of a few key emerging economies. The SC has supported the arrival of digital
market access by being the first country to regulate equity crowdfunding, recognising a
market shift toward growing interest in fund raising and investing through private
marketplaces.
ASSIGNMENT 2

INTRODUCTION OF THE SELECTED COMMERCIAL BANKS

CIMB Bank

CIMB Group Holdings Berhad is a Malaysian universal bank based in Kuala Lumpur that
operates in ASEAN's fast-growing economies. The CIMB Group is an ASEAN investment
bank based in Malaysia. With 1,080 branches in the region, CIMB has a large retail branch
network. CIMB Investment Bank, CIMB Bank, CIMB Islamic, CIMB Niaga, CIMB
Securities International, and CIMB Thai are among the group's subsidiaries. Consumer
Banking, Wholesale Banking, which includes Investment Banking and Corporate Banking,
Treasury & Markets, and Group Strategy & Strategic Investments are the group's main
business sectors. The company employs more than 40,000 people in 18 countries, including
ASEAN and key global financial centres, as well as locations where its customers conduct
significant business and invest. Partnerships enhance the group's geographic reach, as well as
its products and services. Principal Financial Group, Bank of Tokyo-Mitsubishi UFJ,
Standard Bank, and Daewoo Securities are some of its partners.
Malayan Banking Berhad (Maybank Berhad)

Maybank was founded on May 31, 1960, and opened its doors on September 12, the year
that, capitalising on the opportunity to enter the banking and financial environment during a
moment of rapid change as the country gained independence. Maybank's founders had a
grandiose vision for the company, and they wanted it to be successful both in the United
States and around the world. For many centuries, Maybank has been at the top of its game.
Throughout the years, Maybank has been at the forefront of a deliberate effort to grow its
network and reach. The rural credit scheme, card services, corporate and investment banking,
mobile banking, online banking, and Islamic banking are all examples of how the Group has
consistently generated new market norms in product and service delivery.

Throughout the years, Maybank has been at the forefront of a deliberate effort to grow its
infrastructure and accessibility. The rural credit scheme, card services, corporate and
investment banking, mobile banking, online banking, and Islamic banking are all examples of
how the Group has consistently generated new market norms in product and service delivery.
Maybank has 384 branches and 1750 offices in 14 countries, including Malaysia. In the
Forbes Global 2000 ranking of the world's leading firms, it is placed first among Malaysian
listed corporations and within the top 500. It has a global workforce of 45,000 individuals
spread among 2,400 branches and offices in 20 countries.
AFFIN BANK

On May 31, 1975, AFFIN Holdings Berhad (AHB) was incorporated as a private limited
company in Malaysia under the name I.M.A Sdn Bhd. It originated as a finance company that
offered hire-purchase financing for automobiles. On September 15, 1978, it was renamed
AFFIN Motor and Credit Finance (Malaysia) Sdn Bhd. The structure of AHB's group has
changed dramatically over the last decade as a result of a series of mergers and acquisitions
designed to strengthen AHB's position as the flagship financial services arm of its largest
shareholder, Lembaga Tabung Angkatan Tentera (LTAT). The AFFIN Group is a United
States-based international financial services firm.

Commercial, Islamic, and investment banking services, as well as money broking, fund
management, and general and life insurance underwriting, are among the Group's main
businesses. The country's largest superannuation fund manager, Lembaga Tabung Angkatan
Tentera, is a key shareholder in AFFIN Holdings Berhad.
CALCULATION OF FUTURE VALUE OF ANNUITY

Annuity future value is a way to calculate how much income a series of payments will be
worth at a later date. On the other hand, the present value of an annuity is the quantity of
funds required to make a succession of future payments.

P = PMT x [((1 + r)^ - 1) / r]

The formula above are indicated as below:

P = Future value of an annuity stream

PMT = Dollar amount of each annuity payment

r= Interest rate (also known as discount rate)

n=Number of periods in which payments will be made

There calculation of future value annuity of each three commercial bank are as below

CIMB Bank

Interest rate = 0.30% @ 0.0030

FV = 80,000 x [[(1+0.3%)^10] -1]/3%
     = 80,000 x 10.13

= RM 810,400

Malayan Banking Berhad (Maybank Berhad)

Interest rate = 0.25% @ 0.0025

FV = 80,000 x [[(1+0.25%)^10] -1]/0.25%
     = 80,000 x 10.11

= RM 808,800
Affin Bank

Interest rate = 0.25% @ 0.0025

FV = = 80,000 x [[(1+0.25%)^10] -1]/0.25%
     = 80,000 x 10.11

= RM 808,800

COMPARISON OF THE TOTAL SAVINGS BETWEEN THE THREE

COMMERCIAL BANKS

Based on the calculation that has been calculated for all three commercial bank interest rate
by using their websites, it has been found that CIMB Bank turns out having the highest return
with RM810,400 at the end of year 10 in the saving account. CIMB Bank rate of interest are
at 0.3% which is 0.05% higher than Maybank Berhad and Affin Bank that have the same
interest rate of 0.25% return for the amount of money deposited in the bank annually. Both of
Maybank Berhad and Affin Bank has the same return for the amount of money RM80,000 at
year one and RM808,800 at the end of year 10. Thus, it is recommendable for depositor that
look into high interest rate to deposit their fund at CIMB Bank that offer 0.05% higher than
other two commercial bank of Maybank Berhad and Affin Bank to place their savings.

Interest rate changes could have a variety of effects on consumer purchasing habits, based on
a number of aspects such as current rates, expected future rate changes, consumer confidence,
and the overall health of the economy. Saving money in Malaysia is also more enticing than
in other nations due to greater interest rates. As a result of the higher rates, "hot money
flows" will occur, and the Malaysian Ringgit's value will likely rise. Interest rates govern the
amount of interest that savers will get on their deposits. Saving will become more enticing as
interest rates rise, which should encourage people to save. Interest rate reductions lower the
advantages of saving and tend to discourage it.
SUMMARY

The interest rate has played a vital part in offering a better understanding of the commercial
bank's performance. It demonstrates that Malaysia is adequately competing with itself in a
positive manner. The interest rate has played a vital part in offering a better understanding of
the commercial bank's performance. It demonstrates that Malaysia is adequately competing
with itself in a positive manner.
REFERENCES

CIMB. (2021). About us. CIMB. Retrieved from: https://www.cimb.com/en/who-we-

are/about-us.html

Commerce Mate. (n.d). 7 functions and role of capital market. Commerce Mates. Retrieved

from: https://commercemates.com/functions-of-capital-market/

GHANI, Z. A. (1996). 6 Development of the Money Market, Interest Rates, and Financial

Reforms in Malaysia. In Interest Rate Liberalization and Money Market

Development.

International Monetary Fund.

Julia, K. (2021). What is the future value of an annuity? Investopedia. Retrieved from: https://

www.investopedia.com/terms/f/future-value-annuity.asp

Maybank. (2020). Annual Report. Maybank.

MIDF Research. (2020). Maybank expected to see better performance in 4QFY19. The Edge

Markets. Retrieved from: https://www.theedgemarkets.com/article/maybank-

expected-

see-better-performance-4qfy19