金融英语证书考试FECT模拟试题-2

金融英语证书考试FECT模拟试-2 (总分100, 考试时间90分钟) SECTION ONE (Compulsory):Answer all ten questions in this section. Each question carries 1 mark. Multiple-choice questions: from the following four options, select a correct and fill in its labeling the brackets. 1. A production function for a firm describes: () A What should be produced to maximize profit. B What is technologically feasible when the firm produces efficiently. C What revenue is earned from producing efficiently. D What the firm produces with given inputs. 该题您未回答:х 该问题分值: 2 :B 2. Which of the following is not a characteristic of a competitive industry? () A There are many firms. B All firms produce homogeneous products, which are substitutable for each other. C There is a fierce price war among rivals. D Firms can enter and exit the industry freely. 该题您未回答:х 该问题分值: 2 答案:C 3. The Central Bank in the open market buying and selling of securities is designed to: () A regulation bond prices B achieve profit maximization C regulate money supply D adjust prices level 该题您未回答:х 该问题分值: 2 答案:C 4. What unemployment is formed because of the economic recession? () A friction unemployment B structural unemployment C cyclical unemployment D natural unemployment 该题您未回答:х 该问题分值: 2 答案:C 5. After a long race on a hot day, a runner enjoys her first drink a lot, the second she enjoys less and she declines a third drink. This illustrates the principle of: () A Increasing marginal utility. B Decreasing marginal utility. C Increasing marginal cost. D Decreasing marginal cost. 该题您未回答:х 该问题分值: 2 答案:B 6. On a hot day, the price and the quantity sold of ice creams both increase. This can reflect a: () A Shift in the demand curve to the right. B Move along the demand curve. C Shift in the demand curve to the left. D Shift in the supply curve to the right. 该题您未回答:х 该问题分值: 2 答案:A 7. When a country’s currency appreciates, the country’s goods abroad become ______ and foreign goods in that country become ______. A cheaper... more expensive B more expensive... cheaper C cheaper...cheaper D more expensive... more expensive 该题您未回答:х 该问题分值: 2 答案:B 8. A US company is bidding for a contract in China. Its Chinese customer asks for a performance bond. What is the most likely course of action? () A It asks its bank to issue a tender bond which can be converted into a performance bond B It gives up its bid C It consults its bank about issuing a standby letter of credit D It asks its bank to issue a performance bond 该题您未回答:х 该问题分值: 2 答案:A 9. There is a deficit in the federal budget when: () A Federal government spending is greater than federal tax revenues. B U.S. imports are greater than U.S. exports. C The total demand for money is greater than the total supply of money. D U.S. imports are smaller than U.S. exports. 该题您未回答:х 该问题分值: 2 答案:A 10. Mrs. Jones purchased a 20-year Treasury bond bearing a 12% coupon rate. She purchased the bond at par ($1000). If rates fall to 9% what will be the new price of the bond? () A $1333 B $1500 C $750 D $900 E There will be no change in the price of the bond. 该问题分值: 2 该题您未回答:х 答案:D SECTION TWO(Compulsory):Answer the questions in this section. Reading Comprehension: (10 points) James Sigmund, CFA, is the Head of International Equity for Pell Global Advisors (PGA). Sigmund is considering investing in the country of Zuflak as part of an emerging market portfolio. Sigmund is aware of the risks in investing in emerging markets and is preparing a valuation report regarding this investment. He estimates that Zuflak government debt would be rated BB, and has gathered the following market information for use in analyzing Zuflak. Local Government Bond Yield = 11.50% U.S. 10 year Treasury Bond Yield = 4.50% U.S. BB rated Corporate Bond Yield = 7.75% Local Inflation Rate = 6.50% U.S. Inflation Rate = 3.00% To assist in his analysis of Zuflak, Sigmund has asked Stefano Testorf, CFA, to estimate a value for Kiani Corporation (Kiani), Oleg Industries (Oleg), and Malik Incorporated (Malik) - the three primary companies domiciled in Zuflak that Sigmund has determined to have adequate liquidity for inclusion in PGA’s client portfolios. Testorf gives Sigmund a rough draft of his report and tells Sigmund that in order to account for country specific emerging market risks; he used a probability-weighted scenario analysis to adjust cash flows. Sigmund asks him, “Why didn’t you simply adjust the discount rate?” Testorf replies with three reasons: Reason 1: The country risk attributable to Zuflak can be diversified away according to modern finance theory, and should not be included in the cost of capital. Reason 2: Companies in emerging markets tend to exhibit wild price swings both up and down, therefore adjusting cash flows is the best way to account for these symmetrical country risks. Reason 3: Although Kiani, Oleg, and Malik are all domiciled in Zuflak, each of these companies will tend to respond differently to country risks. This makes it virtually impossible to adjust the discount rate for country specific risk and come up with an accurate valuation estimate. After careful analysis by Sigmund and his team, Sigmund decides that he wants to have exposure to Zuflak in his international portfolios. He is still unsure however, what the best way would be to establish the exposure. Sigmund discusses his concerns with Steve Solak, another portfolio manager with PGA. Solak suggests that Sigmund consider using in Zuflak. Solak hands Sigmund a copy a closed-end country fund to invest of a note that he had provided to a client listing facts about country-specific closed end funds. The note contained the following statements: Closed-end country funds provide an excellent means to access local oreign markets. Even nations that have restrictions on foreign f investment are sometimes accessible using closed-end country funds. Closed-end country funds issue a fixed number of shares and are a great way to diversify a U.S.-dollar stock portfolio because of their low correlation with the U.S. stock market. Sigmund thanks Solak for the information and heads back to his office. As he is leaving, Solak asks him if he would have time later that afternoon to discuss the use of American Depository Receipts (ADRs). 11. What is the best estimate of the country risk premium for Zuflak? () A 0.25%. B 1.50%. C 2.75%. D 6.00%. 该题您未回答:х 该问题分值: 2 答案:A Because a U.S. denominated local government bond does not exist, the following formula must be used to calculate the country risk premium: Local government bond yield (non–US dollar denominated) - U.S. 10 year T-bond yield - Inflation differential between local country and U.S. - Yield spread between comparably rated U.S. corporate and U.S. T-bond yields = Country Risk Premium Country Risk Premium = 11.50 – 4.50 – (6.50-3.00) – (7.75-4.50) = 11.50 – 4.50 – 3.50 – 3.25 = 0.25 Note that if a U.S. denominated local government bond did exist, we would use that bond in our calculation and would not include the inflation differential. 12. To determine a valuation estimate for Oleg, Testorf assumes that local investors require a 5 percent real rate of return on companies with similar risk to Oleg. What is Oleg’s price-to-earnings (P/E) ratio, if the company has an inflation flow-through rate of 65 percent? () A 13.75. B 5.33. C 3.00. D 21.25 该题您未回答:х 该问题分值: 2 答案:A P0/E1 = 1 / [real required return + (1 – inflation flow-through rate) × inflation rate] = 1 / [0.05 + (1-.65) × 0.065] = 1 / [0.05 + 0.02275] = 1 / 0.07275 = 13.75 13. In regard to Testorf’s reasons for incorporating emerging market risk into the valuation of Zuflak by adjusting cash flows rather than adjusting the discount rate, which of the following is TRUE?() A Reasons 1 and 3 support Testorf’s cash flow adjustment, but reason 2 does not. B All three of the reasons given support Testorf’s cash flow adjustment. C Reasons 2 and 3 support Testorf’s cash flow adjustment, but reason 1 does not. D Reason 1 supports Testorf’s cash flow adjustment, but reasons 2 and 3 do not. 该题您未回答:х 该问题分值: 2 答案:A Although emerging market risk can be incorporated into the valuation process either by adjusting the discount rate (required return), or by adjusting cash flows in a scenario analysis, evidence suggests that country risks can be best captured through cash flow adjustment. The four arguments that support adjustments to cash flow rather than adjusting the discount rate are: Country risks are diversifiable. Modern finance theory states that country risks can be diversified away, and therefore should not be included in the cost of capital. Testorf’s first reason is correct. Companies respond differently to country risk. A general discount rate cannot be applied uniformly to every company valuation in the country because it would not capture the different operating characteristics of the company that could be captured by adjusting the cash flows. Testorf’s third reason is correct. Country risk is one-sided. Emerging markets have a tendency for companies to exhibit one-sided (down only) risk profiles. Therefore, the risks are asymmetrical and adjusting the cash flows best captures these asymmetrical risks. Testorf’s second reason is incorrect. Identifying cash flow effects aids risk management. Managers tend to identify specific factors affecting cash flow and plan to mitigate their risks by adjusting cash flows rather than adjusting the discount rate. 14. Due to the high inflation rate of the local country, Testorf calculates the return on invested capital (ROIC) for Kiani by revaluing the company’s fixed assets. In comparing the performance of Zuflak to other local companies, the ROIC calculation should: () A Exclude goodwill. B Exclude depreciation. C Not revalue fixed assets. D Exclude net operating profit adjusted for taxes. 该题您未回答:х 该问题分值: 2 答案:A When calculating ROIC, excluding goodwill is useful for comparing different local companies and evaluating trends. Goodwill can distort the comparison when firms have differing levels of goodwill. ROIC that includes goodwill measures returns generated by the firm’s acquisitions based on the use of its investors’ capital, and is used for determining whether or not the company earned an acceptable rate of return over its cost of capital. Note that revaluation is also important here. ROIC including revaluation of fixed assets measures the company’s operating performance, and is also useful for comparing different companies and evaluating trends. 15. With regard to Solak’s note concerning closed end-country funds: () A Statement 1 is correct, statement 2 is correct. B Statement 1 is incorrect, statement 2 is incorrect. C Statement 1 is correct, statement 2 is incorrect. D Statement 1 is incorrect, statement 2 is correct. 该题您未回答:х 该问题分值: 2 答案:C Closed-end country funds provide a simple way to access local foreign markets while achieving international diversification. One of the advantages of closed-end country funds is that investors often have greater access to emerging markets, even those from countries that tend to restrict foreign investment. This is due to the fact that redemptions are less of a concern to the emerging market government because the number of shares of the fund is fixed, and redemptions do not result in capital outflows. Statement 1 on Solak’s note is correct. One of the disadvantages of closed-end country funds is that they may trade at a significant discount premium or discount to their NAV. Although the actual performance of the stock within the closed end fund may have a low correlation with the U.S. market, the NAV of the fund may be highly correlated with the U.S. market, thus reducing the benefit of international diversification. Statement 2 on Solak’s note is incorrect. Explanations of terms 16. Real interest rate 该题您未回答:х 该问题分值: 6 答案: Real interest rate is the nominal rate you earn corrected for the change in the purchasing power of money or for the expected inflation. Roughly speaking, the real interest rate is the difference between the nominal interest rate and the inflation rate, or the nominal interest rate minus the inflation rate. 17. Window instruction 该题您未回答:х 该问题分值: 6 答案: It refers to the case in which a central bank sets the amount of loans to increase or decrease for each season for commercial banks and requires banks to obey the instruction. The measure is not formulated by the law, but it is only an instruction given by the central bank of a country. 18. Special drawing rights 该题您未回答:х 该问题分值: 6 答案: An international type of monetary reserve currency, created by the International Monetary Fund (IMF) in 1969, which operates as a supplement to the existing reserves of member countries. 19. Money market mutual funds 该题您未回答:х 该问题分值: 6 答案: Funds that issue shares to savers backed by holdings of high-quality short-term assets. 20. Putable bonds 该题您未回答:х 该问题分值: 6 答案: A putable bond grants the bondholder the right to sell the issue back to the issuer at par value on designated dates. The advantage to the bondholder is that if interest rates rise after the issue date, thereby reducing the market value of the bond, the bondholder can sell the bond back to the issuer at par. 21. Please list some Capital Market Instruments. 该题您未回答:х 该问题分值: 10 答案: The capital market is extremely important because it raises the funds needed by net borrowers to carry out their spending and investment plans. A smoothly functioning capital market influences how fast the economy grows. (1)Bonds Bonds are long-term debt obligations issued by corporations and government units. Proceeds from a bond issue are used to raise funds to support long-term operations of the issuer (e.g., for capital expenditure projects). In return for the investor’s funds bond issuers promise to pay a specified amount in the future on the maturity of the bond (the face value) plus coupon interest on the borrowed funds (the coupon rate times the face value of the bond). If the terms of the repayment are not met by the bond issuer, the bond holder (investor) has a claim on the assets of the bond issuer. Bond markets are markets in which bonds are issued and traded. They are used to assist in the transfer of funds from individuals, corporations, and government units with excess funds to corporations and government units in need of long-term debt funding. (2) Stocks Stocks are equity claims representing ownership of the net income and assets of a corporation. The income that stockholders receive for their ownership is called dividends. There are two types of stocks, common and preferred. A share of common stock in a firm represents an ownership interest in that firm. Preferred stock is a form of equity from a legal and tax standpoint. Preferred stock pays a fixed dividend, and in the event of bankruptcy of the corporation, the owners of preferred stock are entitled to be paid first before the corporation’s other creditors. Common stock pays a variable dividend, depending on the profits that are left over after preferred stockholders have been paid and retained earnings set aside. (3) Funds In a narrow sense, fund is a reserve of money set aside for some purpose. In general, fund means a financial institution that sells shares to individuals and invests in securities issued by other companies. As you probably know, mutual funds have become extremely popular over the last 20 years. What was once just another obscure financial instrument is now a part of our daily lives. More than 80 million people, or half of the households in America, invest in mutual funds. That means that, in the United States alone, trillions of dollars are invested in mutual funds. In fact, to many people, investing means buying mutual funds. After all, it’s common knowledge that investing in mutual funds is (or at least should be) better than simply letting your cash waste away in a savings account, but, for most people, that’s where the understanding of funds ends. It doesn’t help that mutual fund salespeople speak a strange language that is interspersed with jargon that many investors don’t understand. Originally, mutual funds were heralded as a way for the little guy to get a piece of the market. Instead of spending all your free time buried in the financial pages of the Wall Street Journal, all you had to do was buy a mutual fund and you’d be set on your way to financial freedom. As you might have guessed, it’s not that easy. Mutual funds are an excellent idea in theory, but, in reality, they haven’t always delivered. Not all mutual funds are created equal, and investing in mutuals isn’t as easy as throwing your money at the first salesperson who solicits your business. 22. What kind of Economic Policy in an Open Economy 该题您未回答:х 该问题分值: 10 答案: International economic policy refers to activities of national governments that affect the movement of trade and factor inputs among nations. Included are not only the obvious measures such as import tariffs and quotas, but also domestic measures such as monetary policy and fiscal policy. Policies that are undertaken to improve the conditions of one sector in a nation tend to have repercussions that spill over into other sectors. Since an economy’s internal (domestic) sector, one cannot designate economic policies as purely domestic or purely foreign. Rather, the effects of economic policy should be viewed as being located on a continuum between two poles—an internal-effects pole and an external-effects pole. Although the Primary impact of an import restriction is on a nation’s trade balance, for example, there are secondary effects on national output, employment, and income. Most economic polices are located between the external and internal poles rather than falling directly on either one. 23. What is the Modern Quantity Theory of Money Demand? 该题您未回答:х 该问题分值: 10 答案: (1) The modern quantity theory of money refers to the monetary theory developed by the Chicago School. From the late 1940s through the 1990s, a group of economists, associated in varying degrees with Chicago School, build upon the traditions of classical economics with the benefit of modern theoretical and statistical techniques. Represented by Milton Friedman, originally labeled the Chicago School, but currently referred to either as monetarists or new classical macroeconomists, this informal group has produced a set of ideas with important implications for the role of money in the economy. In 1956, Friedman published his paper " The Quantity Theory of Money Demand—A Restatement", which marked the emergence of the modern quantity theory of money. On one hand, Friedman accepted the Cambridge School and Keynes’s thought that money is an asset and the demand for money is people’s behavior of choosing assets; on the other hand, Friedman basically adopted the conclusion of the traditional quantity theory of money, i. e., the change of the quantity of money is the cause of the movement of price level. (2) In his design of the function of demand for money, Friedman took into consideration the two factors; first, the total wealth expressed with permanent income which is in a reverse ratio to the demand for money; second, the difference between expected rates of return of holding money and other assets. The higher the rate of return of other assets, the weaker people’s desire to hold money. Friedman did not analyze people’s motives of holding money like Keynes, but continued to study the causes of holding money and thought that there are many different factors affecting the demand for money. Friedman used a function to express the demand for money: Md / P =f (Yp, Rm, Rb, Rf, P, W, U ) Md / P: the demand for real money balances, Yp; The real GDP, the index used to count wealth, called permanent income, Rm; The expected rate of return for money, Rb: The expected rate of return for bonds, Re: The expected rate of return for stocks (common stocks), P; The expected rate of return of goods or expected rate of inflation, W; The ratio of non-human wealth to human wealth, U; Other random variables, including preference, custom, technology, system, etc. (3) In Friedman’s view, the wealth affecting the money demand is permanent and the money demand will not fluctuate with ups and downs of business cycles because the permanent income fluctuates a little in shortrun. Generally speaking, the demand for an asset has a positive interrelation with the wealth people hold. Since money is an asset, the demand for money has a positive interrelation with wealth (Yp). Friedman held that factors affecting money demand are the expected rate of return of the assets that can substitute money. Besides holding wealth in the form of money, people can hold their wealth in other forms, say, bonds, stocks (common stocks) and goods. The opportunity cost of holding money is expressed by the expected rate of return of other assets compared with money. When the expected rates of return of bonds (Rb) and stocks (Re) rise the opportunity cost of holding money will increase which will result in less demand for money. The higher the expected rate of return of other assets, the less the demand for money. P is the expected rate of return of holding wealth in the form of goods compared with money. When the prices of goods rise, the rate of return of goods equals the rate of inflation rate. When the expected rate of return of goods is higher compared with that of holding money, people will do well to "beat the higher prices" by purchasing goods sooner than usual (this is the "expectations effect"). human wealth This will reduce the demand for money. W is the ratio of non-to human wealth. Non-human wealth refers to bonds, stocks and other real assets, while human wealth refers to individuals’ ability to make money. This ratio constrains people’s income, e. g.; human wealth can not be obtained when labor force is in a state of unemployment, which naturally reduces the demand for money. Given certain level of wealth, the larger the W, the smaller the money demand. U which refers to other random variables is in a negative correlation with the money demand. Monetarists adhere to virtually all the tenets of classical economists. However, they made some modifications. Some of them have used the quantity theory as a framework for describing the relationship between M and PY rather than just M and P and view the invisible hand as pushing the economy toward the full employment level of production. A second modification of classical thought occurred in Milton Friedman’s revival of the quantity theory is that Friedman replaced the idea of the stability of velocity with the less militant notion that it is predictable. Or, money demand may not be a fixed fraction of total spending; it is related to PY in a close and predictable way. Perhaps the most important classical tradition upheld by modern monetarists is the inherent stability of the economy at full employment. This explains the monetarist rejection of governmental attempts to fine-tune economic activity. A higher level of economic activity requires more capital and labor or technological improvements; more money only leads to inflation. The answer to cyclical downturns is to wait for the natural upturn. Government intervention is unnecessary and potentially damaging. 24. If you are a policy maker, what are your Ultimate Targets of Monetary Policy? 该题您未回答:х 该问题分值: 10 答案: The Four Ultimate Targets of Monetary Policy The four targets of monetary policy include: (1) Economic growth, (2) Price stability, (3) Full employment, and (4) Balance of payments equilibrium. (1) Economic growth Economic growth refers to the growth of a nation’s GDP which is the total value of goods and services domestically produced. People’s living standard has increased dramatically over history as result of the growth of the economy and its productivity. But growth means more than merely increasing total output. It requires that output increase faster than the population so that the average output per person expands. Economic growth in every country is the first target of monetary policy. Without certain growth rate, national economy will be in a state of stop or shrinkage and it will be impossible to enhance a nation’s economic strength and raise people’s living standard. (2) Price stability Price stability means the stability of currency value and control of inflation without great change of price level within certain period. The price stability reflects the general trend of price change or average level. In modern economic society, the general price level shows a rising trend in fact. Price stability is to limit the increase rate of the price level of a certain period within certain scope. As for the certain scope within which the increase rate of price level should be kept, there are different views among economists. Generally speaking, if the rising rate of price level is within 2%—3%, it can be called price stability. Consistently stable prices help create an environment in which the other economic targets are more easily reached. (3) Full employment Full employment means the people who have ability to work and are willing to work can find suitable jobs at present wage level. Full employment is measured with the unemployment rate of labor force. The unemployment rate is the ratio of the number of the unemployed and the labor force willing to work. The unemployment rate represents the extent of full employment in a society. Unemployment means a loss of potential output and imposes costs on the entire economy. For many reasons, a high employment level is one of the paramount goals of monetary policy. Unemployment deprives families of their chief source of income, triggers a host of social problems such as increased incidence of crime and mental illness, and impacts most heavily on the disadvantaged and those at the lower end of the income scale. Collectively, increased unemployment reduces the nation’s level of output and income as well as tax revenues at all levels of government, thereby impairing such public services as roads, public security, and education. Monetary policy affects the unemployment rate by influencing aggregate expenditures on goods and services and the level of the nation’s gross domestic product (GDP). As monetary policy becomes more stimulative, aggregate expenditures and GDP increase and the unemployment rate falls, sometimes below the natural rate. The natural unemployment rate is defined as the lowest level at which the nation’s unemployment rate can be maintained without triggering an increase in the existing inflation rate. If monetary policy becomes too stimulative and the nation’s unemployment rate falls below the natural rate, inflation accelerates. Hence, a goal of central bank policy is to keep the nation’s unemployment rate as close as possible to the natural unemployment rate without going below it. Unfortunately, the natural unemployment rate changes over time and is uncertain at any point in time. Most economists believe it is currently somewhere in the 5 to 6 percent range. (4) Balance of payments equilibrium Balance of payments is the total record of a country’s (or region’s) economic transactions, including money receipts from and payments to abroad, the difference between receipts and payments forms the surplus or deficit. It also includes some economic transactions even if they will never give rise to monetary settlements. Balance of payments during certain period reflects the state of economic development of a country and the country’s external economy. To maintain balance of payments equilibrium and reasonable quantity of foreign exchange are important conditions of a country’s stable development of economy and international intercourse. So to maintain balance of payment equilibrium should be another important target of monetary policy.