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5 Written questions

5 Multiple choice questions

  1. Explains why currencies may diverge from equilibrium values for extended periods. If investment is greater than domestic savings, then capital must flow into the country from abroad to finance the investment. At the same time the country will have a current account deficit, which would normally indiciate that a currency will weaken, but not in this instance.
  2. weighted averages of historical data and some other estimate, where the weights and other estimates are defined by the analyst
  3. concerned with earning excess returns through the use of specific strategies within specific asset groups
  4. r_target = r_neutral + [0.5(GDP_exp - GDP_trend) + 0.5(i_exp - i_target)]
  5. if the earnings yield is lower than the yield on the 10-year TSY, the investor would shift their money into the less risky TSY

4 True/False questions

  1. Six questions for emerging market investors:1. Responsible fiscal and monetary policies?
    2. What is the expected growth?
    3. Does the country have reasonable currency values and current account deficits?
    4. Is the country too highly levered?
    5. What is the level of foreign exchange reserves relative to short-term debt?
    6. What is the government's stance regarding structural reform?

          

  2. 7 step process to formulate capital market expectations1. Responsible fiscal and monetary policies?
    2. What is the expected growth?
    3. Does the country have reasonable currency values and current account deficits?
    4. Is the country too highly levered?
    5. What is the level of foreign exchange reserves relative to short-term debt?
    6. What is the government's stance regarding structural reform?

          

  3. status quo trapanalyst's predictions are highly influenced by the recent past

          

  4. Nine problems encountered in producing forecasts:1. Responsible fiscal and monetary policies?
    2. What is the expected growth?
    3. Does the country have reasonable currency values and current account deficits?
    4. Is the country too highly levered?
    5. What is the level of foreign exchange reserves relative to short-term debt?
    6. What is the government's stance regarding structural reform?

          

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