Sample MS-423 Jan-June 2017

Course Code MS - 423 Course Title Marketing of Financial Services Assignment Code MS-423/ TMA/SEM -I/2017 Assignment Coverage All Blocks

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School of Management Studies INDIRA GANDHI NATIONAL OPEN UNIVERSITY

MAIDAN GARHI, NEW DELHI – 110 068

1. How does a stimulus response theory work in marketing? Explain and discuss in detail the marketing applications of Marshallian model and Pavlovian model. Stimulus Response Theory is a concept in ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- is that a subject is presented with a stimulus, and then responds to that stimulus, ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------least from this perspective.

When one thinks of Stimulus Response theory----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------succinctly, as it demonstrates the way that a stimulus can evoke a predictable ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------Ivan Pavlov and his dogs.

A well-developed and tested model of ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------in the diagram below:.

In the above model, marketing --------------------------------------------------------------------------- certain responses.

Marketing management must --------------------------------------------------------------------------------- – the “black box”.

The Buyer’s ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------what buying behaviour is undertaken.

Characteristics that affect customer behaviour

The first stage of ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------” in the “black box”. These can be summarised as follows:

Let us examine how the stimulus-response theory works in marketing. ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------gives satisfaction, then there is some reinforcement. Additional reinforcement may be given through superior product performance, good service, and the reminder advertising. The advertisements ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------the response to the stimulus created about its products and services with respect to safety, security, utility and status appeal - which is re-enforced by repetition. The publicity campaign ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------effect on bank customers-both existing and probable.

Through repetition of the cues (----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------engaging the consumer's participation in the process through the use of free samples or in-home trials of the product. Finally if learning is reinforced enough and repeat behaviour produced, a purchasing habit may result. Habit is the ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------'people are creatures of habit' is true.

Why most consumer behaviour is habitual: There are ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------an alternative to an existing brand choice, we are forced to think, evaluate, ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------dissatisfied with the new choice.

Second, we rely on habit because of ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------hours, which no one has the time-or the inclination to do.

Third, we resort to habit because it is the ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------us and which do not. When we find a product or service of a bank to our liking we ---------------------------------------------------------------------------------------- to make,

Marketers have three Habit-related Goals,

I) Habit breaking - a device to get consumers ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------consumers to a new product or visit a new store once. i Giving away free ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------, traffic and new clientele.

2) Habit acquisition - to get consumers to acquire a ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------of an earlier purchase response. Examples of advertising themes designed to build purchasing habits are:

The Citi never sleeps' for --------------------------------------------------------------------------------------------- express cards.

3) Habit reinforcement - once consumers are won over----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------may reinforce the habit to such a degree that the purchase decision .is virtually automatic. Examples of -------------------------------------------------------------------------------------------------------------------------- city.

The stimulus response theory states that if the ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------product. Some of the stimuli that the salesperson has a control over are: 1. Self-Physical appearance, mannerism, ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------by the salesperson.

2. Price concessions: A salesperson have ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------and large prospects.

3. Announcement of price changes: ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------changes in the price. 4. Preferential treatment to important -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------are willing to help the salesperson in liquidating his stocks. This theory ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------will follow the salesperson.

This theory works in organizations which have a selling orientation and believe in pushing the sale at all costs.

The stimulus response theory ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------cost. Hence, there have been examples where the salespeople made the sale ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------effect on the final bottom line.

Further, as markets become competitive, the thrust will be ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------in the territory. Internally,sales person who provides relevant information to all departments and coordinates with them in order to ensure high customer satisfaction.

In the stimulus response theory, the principal contact of salesperson in buying organization is the purchase department.

Under this theory there is also a ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------the discounts. Here the sales person takes a chance. If the customer likes their product then ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------customer may revert back to his old brand.

Marketing applications of Marshallian model-

In microeconomics, a consumer's Marshallian demand function (----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------the utility maximization problem. Marshallian demand is sometimes called Walrasian demand (----------------------------------------------------------------------------------------------------------------------------------------------------Marshallian analysis ignored wealth effects.

From one point of view the ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------. But this is not very informative.

A second view is that this is a normative rather ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------to employ economic analysis to decide between a box of 'ship' and 'shakti:' matched, he may apply economic analysis in deciding whether to buy a new car.

A third view is that economic factors operate to a ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------suggests useful behavioural hypotheses such as :

1) The lower the price of the ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------of 'interest rates.

2) Tile lower the price of substitute ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------in case of over drafts and loans.

3) The higher the real income----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------and interest rate is reasonable.

4) The higher the promotional -------------------------------------------------------------------------------- loans and ATM cards.

The validity of these 'hypotheses does not rest on whether all individuals act as econo~nic calculating machines in making their purchasing decisions. For example, some ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- ownership has less status value.

If majority of buyers view price reduction negatively, then sales may decrease, contrary to the'first hypotheses.

But for most goods a price reduction increases ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------. This is observed in respect of reduction of interest rates in case of loans by banks.

The impact of economic factors in actual buying ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------. More recently, the impact of economic variables on the fortunes of different brands has been pursued with significant results.

But economic factors alone cannot explain all the ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------frame of reference for analysing only one small corner of the buyer's mind the 'black box'.

Marketing applications of Pavlovian model-

This model is named after the Russian ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------. The responses were measured by the amount of saliva secreted by the dog. Learning is defined as the changes in ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------of the following factors:

Drive This is a strong internal stimuli which impels action. Because of the drive, a person is stimulated to action to fulfil his desires.

Drives Can be innate (in-born) which stem from ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------that determine when the buyer will respond. We have:

Triggering Cues: These activate the decision process for any purchase.Non-triggering Cues: These influence the decision process but do not activate it.

The modern version of the Pavlovian ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------influence are inadequately treated. Yet the model offers insights about some aspects of behaviour of considerable interest to marketers.

An example would be in the problem of ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------consuiners for its brand. But the company must first get customers to try its brand; and it has to decide between using weak cues and .strong cues.

Light introductory advertising is a week cue ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- by strong brand loyalties.

For example new credit cards ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------offer to attract new members.

To build a bralid habit, it helps to provide ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------buyers are more likely to switch to similar brands than dissimilar ones (generalisation), the company should investigate what cues in the leading brands havc been most effective. Outright imitation may not provide the most ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------of credit cards as 'silver', 'gold', and 'platinum').

The Pavlovian model also provides guidelines in ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------to be a weak cue, hardly able to penetrate the individual's consciousness sufficiently to excite his ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------responses to weaken in the absence of practice. It provides reinforcement because after -------------------------------------------------------- of the products.

The model also provides guidelines for ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------identified. For chocolates, it may hunger' for cars, it may be status, for safety belts, fear. The ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------strongest stimulus to these drives.

2. What are the characteristics of product mix? Explain the important stages in the life - span of a product and discuss as to how it helps in the marketing of banking products. Product mix, also known as product assortment, refers to the total number of product lines that a company offers to its customers. For example, a small company may ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------for cleaning and use similar technologies. Other times, the product lines are vastly ----------------------------------------- include width, length, depth and consistency.

The complete range of products present within a company ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------the risk of being present in the market with a single product. If ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------to expand the number of products it has.

However, if the business market is any example, than ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------so on and so forth. These companies need to have a wide product ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------can be the product mix.

Product mix – As explained, product -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------combination of all these product lines is the product mix. Length of the product mix – If a company has 4 -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------of product lines forms the length of the product mix. This equation is also known as product line length.

Width of the product mix – Where product line -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------lines within a company. Thus, taking the above example, if there are 4 product lines within the company, -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------lines which a company has.

Depth of the product mix – It is fairly easy to -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------mix is the total number of products within a product line. Thus if a company has 4 -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------product line depth.

Product line consistency – The lesser the -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------. So that product mix consistency is high. But Samsung as a company has many product lines which -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------mix consistency is low in Samsung.

Product Mix of Banking Products-

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3. Discuss the activities associated with the management of Issue of Securities and the role played by Lead Manager in managing the Pre-Issue and Post-Issue activities. Some of the major methods of issuing corporate securities are as follows:

1. Public Issue or Initial Public Offer (IPO): Under this method, the company issues a --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- are willing to buy. Advertisements are also issued in the leading ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------the Registrar of Companies.

Once subscriptions are received, the ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------of the Companies Act and the guidelines of SEBI. Otherwise it may lead to civil and criminal liabilities.

Public issue or direct selling of securities ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------scattered throughout the country. This method ensures a wider distribution of securities thereby --------------------------------------------- of economic power in a few hands.

However, this method is quite cumbersome ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------is underwritten. In short, this method is suitable for reputed companies which want to raise large capital and can bear the large costs of a public issue.

2. Private Placement: In this method, the issuing company ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------and economical. Moreover, the company gets the money quickly and there is no risk of non-receipt of minimum subscription.

Private placement, however suffers from ----------------------------------------------------------------------------------------------------------------------------------------------------------------------, it may not sell the securities in the market but keep them with it.

This deprives the public a chance to ------------------------------------------------------------------------------------------------------------------------------------------------------------------placement is very suitable for small issues particularly during depression.

3. Offer for Sale: Under this method, the issuing company allots --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- ‘offer for sale’. It offers to the public shares or debentures for sale at higher ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------become direct allottees of the shares or debentures.

This method saves the company from the cost ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------is saved. But the entire premium received is retained by the offerer and not the issuing company.

4. Sale through Intermediaries: In this method, a company appoints intermediaries ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------supplies blank application forms to each intermediary who affixes his seal on them and distributes --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------do not guarantee the sale of securities.

This method is useful when a company has already ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------and there is uncertainty about the sale of whole lot ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------of securities to the public.

5. Sale to Inside Coterie: A company may resort to subscription ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------for subscription by the inside coterie who can in this way share the future prosperity of the company.

6. Sale through Managing Brokers: Sale of securities through managing brokers ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------securities. They assist companies in pre-issue publicity, drafting and issue of prospectus ------------------------------------------------------------------ of share brokers.

7. Privileged Subscriptions: When an existing company ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------is simpler and cheaper as compared to sale through prospectus.

But the existing shareholders will ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------Shares free of charge to the existing shareholders by capitalising its reserves and surplus. The management of issues for raising long term funds through various types of instruments by the companies. The management of issue of securities involves the following activities:

i) Capital structure ------------------------------------------------------------------------------------ to be issued ii) Pricing of the securities, -------------------------------------------------------------------, general public etc. iii) ---------------------------------------------------------------------------- of the project report iv) Appointment of -------------------------------------------------------------------------------- agencies, lead managers v) Meetings of ----------------------------------------------------------------------------- of contracts/publicity vi) Finalising the ---------------------------------------------------------------- of subscription, vii) Getting ---------------------------------------------------------------------- instruments viii) Stock ---------------------------------------------------------------------------- of allotment ix) Actual ----------------------------------------------------------------------------- Registrar x) Listing of ------------------------------------------------------------------------- exchange

Role played by Lead Manager in managing the Pre-Issue and Post-Issue activities The merchant banker required to play this role is ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------Merchant Bankers Regulations, SEBI Bankers to an Issue Rules, SEBI Underwriters ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------issue managers 1. All issues should be ---------------------------------------------------------------------- the lead manager. (Art1 8) 2. Merchant ----------------------------------------------------------------------------------------- with the SEBI. 3. Number of -------------------------------------------------------------------------------- of any issue of

Public Issue Management Pre-Issue Activities 1. Memorandum of understanding: In terms of -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------up the issue management. This MOU sets out authorities and responsibilities between all the concerned parties, including the other lead managers to the issue.

2. Prepare and Submit the offer document to SEBI: The lead -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------with the due diligence certificate, and other documents namely: 1) undertaking from -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------by the issues that funds will be made available to the registrar for refund ----------------------------------------------------- as prescribed by the SEBI.

3. Filing with ROC: After ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- acknowledgement is obtained.

4. Appointment of other intermediaries: The lead -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------, and enters in to MOU wherever necessary.

5. Dispatch of Issue Material: The dispatch of -----------------------------------------------------------------------------------------------------------------------------------------------------------------issue, well in advance.

6. Underwriting obligations: The lead -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------whichever is less.

7. Publicity of the Issue: In order to ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- advertising agencies.

8. Opening of the Issue: After due publicity through the media, 10 days before the opening date of the issue, newspaper advertisement is given, and the issue opens -------------------------------------------------------------------------------------------------------------------------------------------------------------------------at the collecting centres. The collection figures are obtained on daily basis and filed with SEBI in 3 days reports,> Announcement is also made in newspapers about the closure of the issue.

Post Issue Activities

After the closure of the issue, the Lead manager has to manage the Post Issue activities pertaining to the Issue. 1. Post issue monitoring reports: Whether an -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------, lead manager shall inform to SEBI the exact position of the subscription. Certificate of 90------------------------------------- are obtained and submitted to SEBI. 2. Liaison with all agencies: The lead manager -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------of underwriting is done, if within the limit. Else if the issue is not --------------------------------------------------------------------------- required to be completed. 3. Stock exchange: Inform the stock ---------------------------------------------------------------------------- closure of issue. 4. Allotment of shares: The registrar to the -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------on the basis of applications received for total number of shares, and marketable lots, after approval to the basis of allotment, by Stock exchanges as per SEBI guidelines. 5. Publicity to schedules of allotment refund: Publicity. to ----------------------------------------------------------------------------------------------------------------------------------------------------------------------may be, is given in two dailies. 6. Issue of share certificates/refund orders: Companies/ -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------the company is required to pay interest at the rate of 15% per annum from the 31st day of closure of issue. 7. Listing formalities: The Lead managers, ------------------------------------------------------------------ exchanges.

8. Commission and fees payment: Ensure ----------------------------------------------------------- to all the intennediaries.

9. RBI Approval for NRI: Obtain ------------------------------------------------------------- of securities to NRIs.

10. Investor's grievances: The lead manager ----------------------------------------------------- of the investors.

4. Explain the risks associated with Pension Funds. How can the performance of these funds be measured? Discuss. A Pension is an agreement to provide -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------expectancy and the earlier retirement. The profound social changes have also an impact on the growing population to seek some sort of regular income after retirement instead of depending upon their children in their old age.

Pension funds are being ------------------------------------------------------------------------------ to cover funding black holes.

But while the managers running these ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- forcing more schemes to close.

A report SunGard - which provides -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------will collect their pension for longer.

Most pension funds invest heavily -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------for pension fund managers to meet their funding liabilities.

In its report, “Pension funds at risk – the new -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------a lower base while maintaining growth in the fund is forcing pension fund managers and trustees to pursue more creative and arguably more aggressive investment strategies in order to meet their funding challenges.”

The pension funds generally face the following risks:

Coverage Risk Replacement Risk Investment Risk Longevity Risk

1. Coverage Risk: Employee failing -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------contribution by employee as well as plan participant. 2. Replacement Risk: Employee who retires will -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------be given for employee to contribute more to funds as well as to contribute longer time so that replacement risk can be reduced. 3. Investment Risk: The investment made by pension funds -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------and across countries would help reduces the investment risk which partly depends upon the fund management. 4. Longevity Risk: Risk that the retiree will live longer than -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------risk is 'beneficial to insurance companies and mortality risk is beneficial to pension -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------by floating life insurance companies. Inflation Risk: The risk of price increases, which erode -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------. The government must bring a regulation similar to ERISA in IJSA and form the Pension Benefit Guarantee Corporation (PBGC). The corporation would

guarantee at least inflation risk by charging ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- which are accountable for inflation.

Pension Risk Defined

From an investor's point of view, pension -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------," it is important we note that pension risk arises only with defined-benefit plans.

A defined-benefit pension plan promises -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------to pay the promised benefits. The company bears the investment risk, because it has promised to pay employees a fixed benefit and must make up for any investment losses.

Under a defined contribution plan, which is -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------accounts, rather than paying a fixed benefit directly to retired employees. Therefore, any gains/----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- unionized companies have the greatest risk.

"Underfunded" means that the liabilities, the -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------to fund those required payments. These assets are a combination of invested corporate contributions and the returns on those investments.

Under current IRS and accounting rules, -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------the total portfolio. Companies generally contribute as much stock as they can in order to minimize their -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------overly dependent on the financial health of the employer, for both future contributions and good returns on the employer's stock.

If over three consecutive years the value of the -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------portfolio, which is usually in the form of cash. The need to make this cash payment -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------, ranging from higher interest rates to bankruptcy.

That was the simple part. Now it starts to get complicated.

Shortfall Risk

Determining whether a company has -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------company estimates it will have in the future, to the accumulated benefit obligation, which includes the -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------is required to disclose this information in a footnote in a company's 10-K annual financial statement.

However, this simple comparison is a -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------current value on the benefits that won't be paid until several years into the future and then compare this number to the current value of pension assets. To put it another way, it's like comparing the mortgage on your recently -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------'real' risk that you will default on your mortgage?

Assumption Risk

This is the risk of companies using assumptions to -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------estimating both the accumulated benefits and the amount the company needs to invest to provide those benefits. These assumptions can be made in good faith, or they can be used to minimize any adverse impact on -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------money to the pension fund.

For example, a company could assume a long------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------, however, looks overly optimistic if you consider that the long-term return on stocks is about 7-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------to meet the near-term payment obligations.

Another way companies can manipulate the -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------benefit payments. A higher discount rate will result in a lower benefit obligation. Investors need to review the assumptions, in relation to current economic trends and expectations, in order to evaluate the reasonableness of these assumptions.

How can the performance of pension funds are measured- Let us now see how the ----------------------------------------------------------------------------------------------------------------------------

-------------------------------------------------------------------pension fund management operation.

Total fund returns must be decomposed into -----------------------------------------------------------------------------------------------

------------------------------------------------------------polices because of differences in such factors as liability structure and risk

tolerance, so policy-related return components across different funds contain no information about management skill.

To understand the sources of -----------------------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------continues down to the level of individual portfolio

management mandates within the fund.

When peer ---------------------------------------------------------------------------------------------------------------------------------------

--------------------------------------------------------procedures ace comparable.

Total fund operating costs must --------------------------------------------------------------------------------------------------------------

---------------------------------------------------------------------------------values and different investment policies, minimum-required

operating costs across different funds will differ and will contain no information about management skill.

To understand the sources of incremental --------------------------------------------------------------------------------------------------

---------------------------------------------------------------------------------------------. Ideally, the costs directly related to investment

management should be further decomposed down to the level of individual portfolio management mandates within the fund.

When peer ----------------------------------------------------------------------------------------------------------------------------------------

-------------------------------------------------------are comparable.

When peer comparisons of fund return------------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------decomposition procedures are comparable.

Fund management done in pension funds :

Get efficient system support for key pension fund business operations, including: portfolio --------------------------------- Pre- and ------------------------------------ checks --------------------------------------------- Order ------------------------------------------ -------------------------- measurement Risk ---------------------------------- --------------------------------------

Finally we can say that on account of -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------the Government Provident Fund avenues in which the pension funds can be invested in addition to the providential norms which have been prescribed. This unit explain the need and significance of pension funds and the type of -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------funds have been discussed. Important statistics in relation to pension funds have been provided to enable to you .to have an overall view of this market across countries.

5. What is 'Internet Banking'? Explain the benefits of Internet Banking.

Online banking, also known as internet banking, e-banking or virtual banking, is an electronic payment system that enables customers of a bank or other ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- or be part of the core banking system operated by a bank and is in contrast to branch banking which was the traditional way customers accessed banking services.

To access a financial institution's online banking -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------. The credentials for online banking is normally not the same as for telephone or mobile banking. Financial institutions now routinely allocate customers numbers, whether or not customers have indicated an -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------can be linked to the one customer number. Technically, the customer number can be linked to any account -------------------------------------------------------------------------------------------------------------------------------------------------------------------, savings, loan, credit card and similar accounts.

The customer visits the financial institution's secure website, -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------may transact through online banking are determined by the financial institution, but usually includes obtaining account balances, a list of the recent transactions, electronic bill payments and ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- customer's premises (some banks charge a fee for mailing hard copies of bank statements). Some banks also enable customers to download transactions directly into the customer's accounting software. The facility may also -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------and other routine actions.

Today, many banks are internet-only -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------Federal Deposit Insurance Corporation (FDIC) and can offer the same level of protection for the customers' funds as traditional banks.

Internet banking (or E-banking) means any -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------banking system the bank has a centralized database that is web-enabled. All the services that the bank has -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------branch model of bank is now giving place to an alternative delivery channels with ATM network-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------It would a borderless entity permitting anytime, anywhere and anyhow banking. The network which connects the various locations -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------they are set up. SWIFT is a live example of intranet application. Internet banking in India The Reserve Bank of India -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------access granted. They are: i) Information Only System: General -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------exist facilities for downloading various types of application forms. The communication is normally done through e-mail. There is no interaction between the customer and -----

------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------of the bank through internet. ii) Electronic Information Transfer System: The system -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------still largely of the 'read only' format. Identification and authentication of the -------------------------------------------------------------------------------------------------------------------------------------------------------------The application systems cannot directly access through the internet. iii) Fully Electronic Transactional System: This system allows -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------and control. In this environment, web server and -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------payment gateway and legal infrastructure. Automated Teller Machine (ATM): ATM is designed to perform the most important -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------hours restrictions and paper based verification. There are debit cards. ATMs used as spring board for Electronic Fund Transfer. ATM itself can provide information about customers account and also -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------between accounts, balance enquiries, cash withdrawals and pay bills. It may be on-line or 0ff-line. The on-line ATN enables the customer to avail banking facilities from anywhere. In off-line the facilities are confined -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------Networks and perform his transactions. Credit Cards/Debit Cards: The Credit Card holder is empowered to spend -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------is a prepaid card with some stored value. Every time a person uses this card, the Internet Banking house gets money transferred to its account from the bank of the buyer. The buyers account is debited with the exact amount -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------makes a purchase, he enters his PIN on shops PIN pad. When the card is slurped through the electronic terminal, it dials the acquiring bank system - either Master Card or VISA that validates the PIN and finds out from the -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------the balance in his account. The bank never faces a default because the amount spent is debited immediately from the customers account. Smart Card: Banks are adding chips to their current -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------cards. In addition, these cards are highly secure, more reliable and perform multiple functions. They hold a large amount of personal information, from medical and health history to personal banking and personal preferences. Benefits of Internet Banking Many of us lead busy lives. Some of us are up -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------, and at the end of the day we rush home only to brace ourselves -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------where Online Banking comes in.

There are many online banking advantages-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------. Online Banking also gives you around the clock access to your CD, savings, or checking accounts. Plus, you'll have access to Online Statements. You can monitor your transactions and make sure that your -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------with personal financial software like Quicken.

There are plenty of perks offered --------------------------------------------------------------------------------------------------------------------------------------------------------------- the traditional visit physically to the nearest branch office.

Access your bank accounts anytime, anywhere

Banking online allows you to -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------your balance, transfer money and pay bills on the go. Mobile banking services are generally -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------features like a mobile website and mobile app to enable on-the-go banking and money management. Keep track of account balances to help avoid overdraft fees Sometimes it's far too easy to lose track of -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------Many banks even let you set up alerts to notify you when your balance is low, if a bill is due, when your -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------and late-payment fees.

You can also use your smartphone to check -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------cashed, as well as any automatic payments due to come out of your account soon. Many -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------. (Learn more about Bank of America overdraft solutions.)

Organize your bill payments Paying your bills online can make your -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------. In addition, paying your bills online keeps all of your billing records in one easy-to-find place. You can also set up automatic payments using your debit or credit card.

See how much you pay, and to whom

Many online banking systems let you see ------------------------------------------------------------------------------------------------------

-----------------------------------------------------------------------------------------season rolls around, you can easily access a record of

all the online payments you've made. For example, you can --------------------------------------------------------------------------------

--------------------------------------------------------------------------------------------------------------- could be tax deductible.

Convenience: This is the single most -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------at the click of a button without even having to step out is a facility none would like to forego. Keeping a -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------like ordering check books online, updating accounts, enquiring about interest rates of various financial products etc become much simpler on the internet.

Better Rates: The banks stand to gain -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------to deal with the customers is significantly reduced making it financially beneficial to the banks. This means that a portion of savings accrued can be passed on to the customers in terms of higher rates on deposits and lower -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------withdrawal of Fixed Deposits.

Services: Technology has made it extremely -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------, functional budgeting and forecasting tools, loan calculators, investment analysis tools and equity -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------tax forms and tax preparation.

Mobility: Internet banking has a step further -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------transactions even while on the move.

Another important benefit of the concept of -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------and also does not add emissions.