CFA Investment Foundations Mock Exam
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Already Passed! (Complete & Accurate)
The crowding out effect will most likely lead to higher:
tax revenues.
interest rates.
private investment. - ANS ✓Interest rates
Which of the following actions taken by a central bank is best
described as expansionary?
Increasing its policy rate
Purchasing government bonds
Increasing the reserve requirement - ANS ✓Purchasing government
bonds
A government implements a policy that encourages consumers and
businesses to increase spending and investment. Those who benefit
from this additional spending, in turn, increase their own spending.
The mechanism by which the initial increase in spending increases
total spending by a greater amount is known as the:
An obstacle to the alignment of international business cycles is the
existence of international:
policy forums.
free trade zone agreements.
restrictions on capital flows. - ANS ✓Restrictions on capital flows
The broadest-based measure of a nation's inflation rate is provided by
the:
implicit GDP deflator.
consumer price index (CPI).
producer price index (PPI). - ANS ✓Implicit GDP deflator
The US dollar is currently the world's most dominant reserve
currency. If the US dollar was not a reserve currency, the competitive
position of US exporters would most likely be:
weaker.
stronger.
unaffected. - ANS ✓Stronger
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The theory of purchasing power parity states that the exchange rate
between any two countries will adjust to reflect:
the price levels between them.
their current account balances.
any arbitrage opportunities between their exchange rates. - ANS ✓The
Price levels between them
A US merchant purchases wine from a vineyard outside of Paris. The
wine is transported to the United States on a Canadian ship. The
Canadian ship is insured by an insurance company incorporated in
England. An export would be reported by:
France only.
France, England, and Canada.
United States, France, England, and Canada. - ANS ✓France, England,
And Canada
Country X has a comparative advantage for a good over its trading
partner, Country Y. This advantage means that relative to Country Y,
Country X:
is a net importer of the good.
has imposed a quota on the good.
produces the good more efficiently. - ANS ✓Produces the good more
efficiently
To improve the usefulness of ratio analysis, an analyst should
calculate ratios and:
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focus on the ratios that have increased from the previous year.
compare the company's current performance with that of its
competitors.
compare the company's current and prior performance with that of its
competitors. - ANS ✓compare the company's current and prior
performance w/ that of its competitors.
Unpaid operating expenses, such as the utilities bill for the last month
of the year, are included in:
operating expenses when paid.
accounts receivable in current assets.
accrued expenses in current liabilities. - ANS ✓Accrued expenses in
current liabilities
Which of the following cash outflows on a company's cash flow
statement is likely to be considered a recurring activity? Amounts
used to:
An investor is deciding between two projects, both of which have an
initial cost of £5,000. One project will return £10,000 in three years
with a 5% discount rate and the other project will return £9,500 in
two years with a 3% discount rate. The investor determines the first
project is worth £8,638 today, whereas the second project is worth
CFA Investment Foundations
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