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Concordia University FINA 385 BMC Review Questions WITH VERIFIED ANSWERS

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BLOOMBERG MARKET CERTIFICATE REVIEW QUESTIONS What does the Big Mac index show? a) How the law of one price is true of consumer products b) How currencies may be overvalued or undervalued c) How i... nterest rates and inflation affect trade d) How The Economist magazine estimates inflation Which of these headlines could move a currency pair a) U.S. Stocks Rally on Fed’s Surprise Reduction of Interest Rate b) Railroad Rate Hikes Drive Dichotomy of Necessary c) Hong Kong ‘Firmly Committed’ to Dollar Peg, John Tsang Says d) Grade Inflation: Devaluing B-Schools’ Currency What is the most common target inflation rate for an advanced economy? a) 1% b) 2% c) 3% d) 0% What was the primary goal of Abenomics? a) To reduce inflation by increasing unemployment b) To reign in GDP by reducing business confidence c) To halt the vicious cycle of deflation d) To strengthen the yen to foster consumption of luxury goods Were the two oil crises in the 1970s linked to deflation or inflation? a) Deflation b) Inflation c) Both d) Neither On June 23, 2016, the UK voted to leave the European Union. The white line shows the UK’s main equity index, the FTSE 100, from the start of 2016 to the date on which the UK government notified the European Union of its intent to buy one pound sterling. The Uk is a net importer, meaning the value of imports exceedsthe value of exports. We can be reasonabky surmised from the chart about large UK corporations? a) Their CEOs probably voted toremain in the E.U. b) Their CEOs probably voted to leave the E.U. c) They are probably heavy exporters d) They are probably heavy ImportersIn early 2016, the same Germany machinery company has interest from four prospective clients from engineering markets: Indonesia, Brazil, Russia, and South Africa. They all want to buy ten machines, but the factory can only produce ten in time. Therefore, the company has to choose only one client. Given the volatility of the domestic currencies of the four prospective clients, the CEO would like to choose the client which is least likely to cancel the order due to currency volatility. The invoice comes due on June 30, 2016. According to historical currency volatility alone, which prospective client would be least likely to cancel the order (see chart 1)? a) Indonesia b) Brazil c) Russia d) South Africa Imagine you are a Dutch diamond dealer who sources diamonds from South Africa. […] You check the forward rates on offer on the Bloomberg FRD function. You have two options. Exchange euros today at today’s exchange rate to pay him on million rands now, or lock in a forward agreement to convert euros to one million rands in one year’s time and share the forward agreement with him. If you were to do the forward instead of exchanging euros for rands today, approximately how much more or less would you end up with in a year? (see chart 2) a) EUR 4,717 more b) EUR 4,717 fewer c) ZAR 4,717 more d) ZAR 4,717 fewer Legendary investor Warren Buffet said: “Gold gets dug out of the ground…. Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their head.” Based on this quotation, what quality of gold is he referring to? a) Its durability b) Its scarcity c) Its physical attractiveness d) Its storage costs Here is a chart showing both nominal GDP growth and real GDP growth for a country. Which of the following can be a true statement at the time the chart was captured? a) The country has inflation. The top line is nominal growth and the bottom line is real growth. b) The country has inflation. The bottom line is nominal growth and the top line is real growth. c) The country has deflation. The top line is nominal growth and the bottom line is real growth. d) The country has deflation. The bottom line is nominal growth and the top line is real growth.Which of the following lines is the best leading economic indicator? a) PMI b) Nonfarm payrolls c) Real GDP growth d) U.S. auto sales The “misery index” is often cited in the media as a way to measure consumer pain. It is defined as the inflation rate plus the unemployment rate. Identify the country with the highest “misery index.” a) Argentina b) India c) France d) Italy What tipically happens to nonfarm payrolls, the PMI indicator, and housing starts at the onset of a recession in the United States? a) Nonfarm payrolls go UP, the PMI indicator goes DOWN, the housing starts goes DOWN b) Nonfarm payrolls go DOWN, the PMI indicator goes DOWN, the housing starts goes DOWN c) Nonfarm payrolls go DOWN, the PMI indicator goes UP, the housing starts goes UP d) Nonfarm payrolls go UP, the PMI indicator goes UP, the housing starts goes UP Which of the following qualities of economic indicators do investors prize the most? a) Rigor b) Sample size c) Timeliness of release d) Government sponsorship Why is the release of GDP statistics less interesting to investors than the release of other economic indicators? a) Because governments consistently alter their GDP measurement methods b) Because the formula for GDP includes not only private investment but also other irrelevant factors c) Because GDP is not official government data d) Because GDP statistics are released well after other economic indicators Which of the following important U.S. economic indicators is only available on a quarterly basis? a) Nonfarm payrolls b) CPI c) GDP d) PMI [Show More]

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