CompTIA
Checkpoint
ISC
HP
Dell
EC-Council
EXIN
Fortinet
ITIL®
Juniper
PMI
Microsoft
VMware
Avaya
Google
Salesforce
Amazon
Palo Alto Networks
Certiport
ISC2
All Vendors
  2. Home
  3. Exams
  4. Test Prep
  5. CFA-Level-I

Free CFA-Level-I Exam Braindumps (page: 307)

Page 306 of 991
PDF with 3963 Questions

When a domestic resident purchases a foreign stock directly on the foreign stock exchange, the transaction is entered as a ________ in the BOP account.

  1. deficit
  2. surplus
  3. credit
  4. debit

Answer(s): D

Explanation:

In BOP accounting, by convention:
1. Any inflow of domestic currency represents a credit and any outflow of domestic currency represents a debit on the BOP account.
2. Any inflow of foreign currency represents a debit and any outflow of foreign currency represents a credit on the BOP account.
Thence, direct purchase of a foreign stock, which represent an outflow of domestic currency, is treated as a debit in the BOP account.



If high-yield investment opportunities attract capital from abroad and lead to a capital account surplus, then the:

  1. nation will also experience a balance of trade surplus.
  2. nation must run a current account surplus under a pure flexible exchange rate system.
  3. nation's currency must depreciate.
  4. nation must run a current account deficit under a pure flexible exchange rate system.
  5. nation's currency must appreciate.

Answer(s): D

Explanation:

If a nation is experiencing a surplus on its capital account balance, it must experience an offsetting deficit on its current account and vice versa. By definition, the balance of payments must be in balance so that the capital account offsets the current account.



If a restrictive fiscal policy places downward pressure on real interest rates, we would expect

  1. all of these answers are correct.
  2. inflationary pressures to increase.
  3. an increase in the dollar.
  4. an outflow of capital.
  5. an increase in the budget deficit.

Answer(s): D

Explanation:

Investors facing a declining real interest rate would liquidate their assets and move their capital elsewhere in search of a higher yield. The consequence would be a capital outflow from the country.



The flow of money for the purpose of taking advantage of a covered interest differential is known as ________.

  1. an outright swap
  2. covered interest differential
  3. the swap rate
  4. covered interest arbitrage
  5. interest rate parity

Answer(s): D

Explanation:

The flow of money for the purpose of taking advantage of a covered interest differential is known as covered interest arbitrage'






Post your Comments and Discuss Test Prep CFA-Level-I exam with other Community members:

CFA-Level-I Exam Discussions & Posts