FINA 385 BLOOMBERG MARKET CERTIFICATE REVIEW QUESTIONS

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 interest 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 Importers In 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