2019 CFA level 3 qbank r 16 17 capital market expectations equity market val questions

10/12/2018 Learning Management System Question #1 of 99 Which of the following is consistent with a at yield curve? A) Monetary policy is expansive while scal policy is restrictive B) Monetary policy is restrictive while scal policy is expansive .in C) Monetary policy is restrictive and scal policy is restrictive en tre Question #2 of 99 Which of the following would be consistent with Country A having higher real interest rates than Country B? bo ok c A) Country A has a looser monetary policy and a faster growing economy B) Country A has a tighter monetary policy and a slower growing economy m C) Country A has a tighter monetary policy and a faster growing economy .o Question #3 of 99 w w During which phase of the business cycle would TIPS be least useful to a portfolio manager? w A) Slowdown B) Initial recovery C) Early expansion Question #4 of 99 https://www.kaplanlearn.com/education/dashboard/index/66a9ea0d62bb71ab495925615029a3fd/practice/qbank/24038518/quiz/83450049/print 1/36 10/12/2018 Learning Management System The following table re ects economic data for Market Q: Expected growth in total factor productivity 1.0% Expected growth in the labor 2.0% Expected growth in capital stock, α = 0.4 1.2% Using the Cobb-Douglas production function and the data provided, the expected growth (percentage change) in real economic output for Market Q is closest to: A) 2.7% B) 3.2% en tre in C) 3.0% bo ok c Question #5 of 99 Which of the following is NOT a characteristic of economic indicators as used in economic forecasting? Economic indicators: A) are di cult to understand and interpret m B) can be adapted for speci c purposes w w o C) have an e ectiveness that has been veri ed by academic research w Question #6 of 99 Which phase of the business cycle is characterized by rising stock prices but increased investor nervousness? A) Late expansion B) Initial recovery C) Slowdown Question #7 of 99 https://www.kaplanlearn.com/education/dashboard/index/66a9ea0d62bb71ab495925615029a3fd/practice/qbank/24038518/quiz/83450049/print 2/36 10/12/2018 Learning Management System Of the following investment strategies, which one would bene t most from a bottom-up forecasting approach in predicting equity returns? A) Allocating invested funds across various markets B) Buying and selling individual securities to capture short-term pricing ine ciency C) A macro hedge fund manager allocating funds among currency markets Which of the following is NOT an input to the Taylor rule? en tre A) The expected GDP .in Question #8 of 99 B) The discount rate Question #9 of 99 bo ok c C) The neutral rate m Which of the following statements regarding spending and the business cycle is least accurate? o A) The inventory cycle is shorter than the business cycle w w B) As a percentage of GDP, consumer spending is much larger than business spending w C) Business spending is less volatile than consumer spending Question #10 of 99 https://www.kaplanlearn.com/education/dashboard/index/66a9ea0d62bb71ab495925615029a3fd/practice/qbank/24038518/quiz/83450049/print 3/36 10/12/2018 Learning Management System The following data pertains to an equity market index Last dividend (D0) 100 Forecast earnings per share 300 Current and sustainable long-term growth rate 2.5% Required return 7.5% Yield on 10-year government bond 6.0% Using the data in the table, the intrinsic price level of the equity market index is closest to: in A) 2,000.00 en tre B) 2,929.00 Question #11 of 99 bo ok c C) 2,050.00 Which of the following is consistent with a likely weak economy in the future? m A) Monetary policy is expansive and scal policy is expansive .o B) Monetary policy is restrictive while scal policy is expansive w w w C) Monetary policy is restrictive and scal policy is restrictive Question #12 of 99 Which of the following is most representative of an exogenous economic shock? A) Ongoing expansionary scal policy by the federal government leading to higher in ation and interest rates B) A hurricane hitting the Gulf of Mexico resulting in the shut-down of many oil wells and re neries and to higher oil prices C) Anticipated loose monetary policy by a country’s central bank leading to in ation and to depreciation in the country’s currency https://www.kaplanlearn.com/education/dashboard/index/66a9ea0d62bb71ab495925615029a3fd/practice/qbank/24038518/quiz/83450049/print 4/36 10/12/2018 Learning Management System Question #13 of 99 Which of the following statements regarding emerging market government debt is most accurate? Emerging market government debt is usually denominated in: A) a non-domestic currency which makes them less credit risky B) a non-domestic currency which makes them more credit risky .in C) the domestic currency which makes them more credit risky en tre Question #14 of 99 Which of the following statements regarding Tobin's q and the equity q is least accurate? bo ok c A) The equilibrium value for both Tobin’s q and the equity q is B) Tobin’s q compares the current market value of a company to the replacement cost of its assets C) The equity q compares the aggregate market value of the rm’s equity to the market w w o m value of the rm’s net worth Question #15 of 99 w Which of the following is NOT indicative of low risk in an emerging market economy? A) Foreign exchange reserves are twice that of the short-term debt B) A foreign debt level that is 75% of GDP C) A current account de cit that is 2% of GDP Question #16 of 99 If in ation rises, the yields for TIPS will: https://www.kaplanlearn.com/education/dashboard/index/66a9ea0d62bb71ab495925615029a3fd/practice/qbank/24038518/quiz/83450049/print 5/36 10/12/2018 Learning Management System A) rise and their price will fall B) fall and their price will rise C) rise and their price will rise Question #17 of 99 An equity market's forecasted EPS is 15.30 Assuming a required real return on equity of 8%, a current dividend of 10, current supernormal growth of 9.5%, a long-term sustainable rate of in growth of 2.0%, and a 20-year period of linear growth decline, the estimated forward price- en tre earnings ratio (P0/E1) of the market is closest to: A) 15.4 B) 19.3 m Question #18 of 99 bo ok c C) 23.1 Given an S&P 500 forward earnings yield of 7.2% and 10-year Treasury notes yielding 2.68%, o which of the following interpretations of this data using the Fed model is most accurate? w w A) The spread between the S&P 500 earnings yield and the Treasury notes is too great to make an informed decision w B) Since the S&P 500 is earning signi cantly more than the Treasuries this indicates the S&P 500 equity market is overvalued C) The S&P 500 earnings yield is higher than the Treasury yield indicating that equities are undervalued and should increase in value Question #19 of 99 A top-down forecast of earnings per share for an equity market index is best described as: https://www.kaplanlearn.com/education/dashboard/index/66a9ea0d62bb71ab495925615029a3fd/practice/qbank/24038518/quiz/83450049/print 6/36 10/12/2018 Learning Management System A) using macroeconomic factors to estimate the performance of market-wide indicators B) taking a microeconomic perspective by focusing on the fundamentals of individual rms C) looking at an individual rm’s product development relative to the rest of the industry Question #20 of 99 Which of the following statements regarding risk in emerging market economies is least in accurate? en tre A) The economies are often heavily dependent on consumer durables B) Their undiversi ed nature makes them susceptible to volatile capital ows and economic crises m Question #21 of 99 bo ok c C) Equity investors should focus on growth prospects and risk Which of the following is NOT a characteristic of a good forecast using capital market o expectations? The forecasts: w w A) are subjectively formed B) have a minimum amount of forecast error w C) are consistent with the forecasts used for other assets Question #22 of 99 If population is expected to grow by 3%, labor force participation is expected to grow by 0.25%, spending on new capital inputs is projected to grow at 2.75% and total factor productivity will grow by 0.75% What is the long-term projected growth rate? A) 5.75% https://www.kaplanlearn.com/education/dashboard/index/66a9ea0d62bb71ab495925615029a3fd/practice/qbank/24038518/quiz/83450049/print 7/36 10/12/2018 Learning Management System B) 6.00% C) 6.75% Question #23 of 99 Which of the following is NOT a characteristic of econometrics as used in economic forecasting? Econometrics: B) provides a straightforward method of creating a model bo ok c Question #24 of 99 en tre C) is better at forecasting expansions than recessions .in A) can provide precise quantitative forecasts of economic conditions Which of the following statements about the Cobb Douglas production function is least accurate? The Cobb-Douglas production function assumes the: m A) output elasticities of capital and labor, α and β, sum to 1.0 present .o B) growth in total factor productivity (TFP) is zero when constant returns to scale are w w w C) growth in economic output must be less than the growth in corporate earnings Question #25 of 99 Which of the following is the best interpretation of the 10-Year Moving Average Price/Earnings Ratio (also referred to as the P/10-year MA(E))? A) By comparing the 10 year moving average P/E ratio for a market to the current P/E ratio we can determine whether or not the market is over or under priced B) A 10 year moving average P/E ratio greater than the current P/E ratio for a market indicates the market is currently undervalued https://www.kaplanlearn.com/education/dashboard/index/66a9ea0d62bb71ab495925615029a3fd/practice/qbank/24038518/quiz/83450049/print 8/36 10/12/2018 Learning Management System C) The numerator of the P/10-year MA(E) is the value of the S&P 500 price index, and the denominator is the average of the previous ten years’ reported earnings Question #26 of 99 Frank Bowden is formulating the expected returns, standard deviations, and correlations for bonds and equities given global economic forecasts Tom Weatherford is examining the returns to a U.S small-cap stock based on analyst's forecasted returns versus the capital asset pricing in model and the security market line Which of the following about Bowden and Weatherford is most accurate? en tre A) Bowden is performing beta research and Weatherford is performing alpha research B) Bowden is performing alpha research and Weatherford is performing beta research Question #27 of 99 bo ok c C) Bowden is performing beta research and Weatherford is performing beta research m Which of the following statements most accurately describes the relationship between the o intrinsic value of an equity market index and the input variables in the H model? The intrinsic w w value of an index is: A) positively related to the growth rate and length of the period of decline but negatively related to the required return w B) negatively related to the growth rate but positively related to the length of the period of decline and required return C) positively related to the growth rate and required return but negatively related to the length of the period of decline Question #28 of 99 If a cash manager thought the economy was going to have a robust recovery, (s)he would: https://www.kaplanlearn.com/education/dashboard/index/66a9ea0d62bb71ab495925615029a3fd/practice/qbank/24038518/quiz/83450049/print 9/36 10/12/2018 Learning Management System A) shift from longer-term cash instruments to shorter-term cash instruments and from more credit worthy instruments to less credit worthy instruments B) shift from longer-term cash instruments to shorter-term cash instruments and from less credit worthy instruments to more credit worthy instruments C) shift from shorter-term cash instruments to longer-term cash instruments and from more credit worthy instruments to less credit worthy instruments .in Question #29 of 99 en tre During an economic recession, which of the following items will increase? A) Interest rates B) In ation m Question #30 of 99 bo ok c C) Bond prices .o Which of the following statements regarding global economies is most accurate? A) Neither emerging nor developed country economies are perfectly integrated w w B) Both emerging and developed country economies are perfectly integrated w C) Developed economies are perfectly integrated but not emerging countries Question #31 of 99 https://www.kaplanlearn.com/education/dashboard/index/66a9ea0d62bb71ab495925615029a3fd/practice/qbank/24038518/quiz/83450049/print 10/36 10/12/2018 Learning Management System Question #62 of 99 An analyst believes that a recession is likely to develop that will a ect many of the world economies She believes that Country A's GDP should be forecast using current and lagged economic data for it as well as from other countries that may in uence Country A What type of country is Country A and what type of forecasting model should be used? Country A is most likely a: A) small country and its GDP should be forecast using an econometric approach .in B) large country and its GDP should be forecast using an econometric approach en tre C) small country and its GDP should be forecast using a checklist approach bo ok c Question #63 of 99 During the initial recovery phase of the business cycle, which of the following items will be increasing? B) Bond yields m A) Stock prices w w o C) Short-term interest rates w Question #64 of 99 Which of the following approaches to forecasting currencies states that long-term investors will a ect the values of currencies? A) The savings-investment imbalances approach B) The capital ows approach C) The PPP https://www.kaplanlearn.com/education/dashboard/index/66a9ea0d62bb71ab495925615029a3fd/practice/qbank/24038518/quiz/83450049/print 22/36 10/12/2018 Learning Management System Question #65 of 99 The savings-investment imbalances approach would most likely project a strong domestic currency during which phase of the economy? A) Early expansion B) Slowdown C) Late recession en tre in Question #66 of 99 Which of the following is NOT a characteristic of a checklist approach as used in economic forecasting? A checklist approach: A) may not be able to model complex relationships bo ok c B) requires subjective judgment m C) does not allow for changes in the model over time .o Question #67 of 99 w w Calculate the short-term interest rate target given the following information 4.00% In ation target 2.00% Expected In ation 5.00% GDP long-term trend 3.00% Expected GDP 1.00% w Neutral rate A) 4.5% B) 6.5% C) 5.0% https://www.kaplanlearn.com/education/dashboard/index/66a9ea0d62bb71ab495925615029a3fd/practice/qbank/24038518/quiz/83450049/print 23/36 10/12/2018 Learning Management System Bill Litner, CFA and Susan Cabell, CFA are composing an economic and nancial newsletter for the employees of Terri c Tires, Inc (TTI) In it, Litner and Cabell will publish their capital market expectations The purpose of the newsletter is to help TTI's employees make decisions in the management of their de ned contribution pension plans Litner and Cabell have subscribed to several sources of data to compose the forecasts that they intend to include in the newsletter One data set consists of macroeconomic variables such as unemployment, interest rates, and output for various sectors of the economy and the entire economy (GDP) Litner and Cabell compute the correlations of the macroeconomic data with the returns of a select group of stocks They use 10 years of weekly data to compute the in correlations After nding the economic variables that have the highest correlations with the en tre stocks, they compose a model using those variables to predict the returns of the stocks Litner and Cabell also perform a factor analysis of stocks FGI and VCC Using a world index "S" and a world bond index "B" in a two-factor model, they compute the following estimated equations for the returns of FGI and VCC respectively: bo ok c RFGI = 1.4 × FS,FGI − 0.2 × FB,FGI + εFGI RVCC = 0.8 × FS,VCC + 0.1 × FB,VCC + εVCC The variance of the stock and bond factors are 0.04 and 0.007 respectively The covariance of o returns of FGI and VCC m the two factors is 0.01 Litner and Cabell will use these results to forecast the covariance of the Litner and Cabell intend to augment their capital market expectations models with data on w w consumer and business spending They have not used this data before, but they feel this data can help in the prediction of changes in the business cycle In order to have more focus, they w want to determine which of the two measures might be more important They think it would be better to focus on business spending for several reasons Litner says that business spending is more volatile than consumer spending Cabell says that business spending is also the larger of the two In ation is another variable that Litner and Cabell consider for their models They discuss the relationship between in ation and asset returns Cabell suggests that in ation can be used with GDP growth for predicting the Fed's next move on interest rates They look at their macroeconomic data to see how the current GDP growth compares to the trend GDP growth and the current in ation compares to the Fed's announced in ation target They nd that the current GDP growth is higher than the trend GDP growth In ation is lower than the announced target from the central bank Litner and Cabell employ the Taylor Rule for predicting a change, https://www.kaplanlearn.com/education/dashboard/index/66a9ea0d62bb71ab495925615029a3fd/practice/qbank/24038518/quiz/83450049/print 24/36 10/12/2018 Learning Management System if any, in the central bank's target for the short-term interest rate In considering how to address interest rates in their newsletter, Litner and Cabell also look at the shape of the yield curve, which is currently at Litner and Cabell discuss the conditions that could give a at yield curve Litner says that such a curve is indicative of restrictive monetary policy Cabell says that a at yield curve is indicative of expansionary scal policy Litner and Cabell discuss the use of economic indicators that are available for governments and international organizations, and they agree that the availability of the indicators is one of the advantages of using such indicators Litner says another advantage of such indicators is that economic variables and asset returns tend to have fairly stable relationships with the indicators indicators can be readily adapted for speci c purposes .in that are fairly consistent over time Cabell adds that another advantage is that the economic en tre Having assessed their available resources and strategy, Litner and Cabell begin composing their newsletter for TTI employees bo ok c Question #68 of 99 In composing their model using the macroeconomic data, the approach of Litner and Cabell: A) may have problems because they are using data from too early a time only B) is justi ed based upon the length of the data set but not by its using historical m correlations .o C) may have problems because they are using data from too early a time and they are w w w assuming correlation is causation Question #69 of 99 Using the results of the estimated factor models, the forecasted covariance of FGI and VCC would be closest to: A) 0.0244 B) 0.0488 C) 0.0445 https://www.kaplanlearn.com/education/dashboard/index/66a9ea0d62bb71ab495925615029a3fd/practice/qbank/24038518/quiz/83450049/print 25/36 10/12/2018 Learning Management System Question #70 of 99 With respect to their comments concerning the relative volatility and size of business spending with respect to consumer spending Litner: A) is correct and Cabell is incorrect B) is incorrect and Cabell is correct C) and Cabell are both incorrect en tre in Question #71 of 99 With respect to how the central bank will change its target for the short-term interest rate, using the given information concerning GDP and in ation and the Taylor rule, Litner and Cabell: A) would forecast a decrease in the target bo ok c B) would forecast an increase in the target m C) cannot predict how the target might change .o Question #72 of 99 w w With respect to what the current shape of the yield curve indicates: A) Litner is correct and Cabell is incorrect w B) both Litner and Cabell are incorrect C) both Litner and Cabell are correct Question #73 of 99 In their discussion of the advantages of using economic indicators: A) Litner is incorrect and Cabell is correct B) Litner is correct and Cabell is incorrect https://www.kaplanlearn.com/education/dashboard/index/66a9ea0d62bb71ab495925615029a3fd/practice/qbank/24038518/quiz/83450049/print 26/36 10/12/2018 Learning Management System C) both Litner and Cabell are correct Question #74 of 99 Which asset would perform the worst during de ationary periods? A) Real estate nanced with debt B) Real estate wholly owned en tre in C) Corporate bonds Question #75 of 99 bo ok c Suppose an analyst is valuing two markets Market A is a developed country market and Market B is an emerging market What is the expected return for the emerging market given the following information? 0.29 Standard deviation of the global portfolio 8.00% o m Sharpe ratio of the global portfolio 4.00% Degree of market integration for Market A 80% Degree of market integration for Market B 65% Standard deviation of Market A 18.00% Standard deviation of Market B 27.00% Correlation of Market A with global portfolio 0.86 Correlation of Market B with global portfolio 0.61 Estimated illiquidity premium for A 0.00% Estimated illiquidity premium for B 2.50% w w w Risk-free rate of return https://www.kaplanlearn.com/education/dashboard/index/66a9ea0d62bb71ab495925615029a3fd/practice/qbank/24038518/quiz/83450049/print 27/36 10/12/2018 Learning Management System A) 12.35% B) 8.35% C) 9.85% Question #76 of 99 Which of the following regarding the formulation of capital market expectations is least in accurate? An analyst should: A) consider the investor’s tax status, allowable asset classes, and time horizon en tre B) investigate assets’ historical performance and their determinants Question #77 of 99 bo ok c C) vary their assumptions when interpreting data and drawing conclusions Suppose the analyst estimates a 1.8% dividend yield, long-term in ation of 3.4%, real earnings m growth of 5.0%, an increase in shares outstanding of 0.6%, and a P/E repricing of 0.2% What B) 9.8% w C) 8.6% w w A) 11.0% .o would be the expected return on the stock market? Question #78 of 99 The Cobb-Douglas production function (CD) uses the country's labor input and capital stock in order to estimate: A) total real economic output B) total factor productivity (TFP) C) total output elasticity https://www.kaplanlearn.com/education/dashboard/index/66a9ea0d62bb71ab495925615029a3fd/practice/qbank/24038518/quiz/83450049/print 28/36 10/12/2018 Learning Management System Question #79 of 99 Which of the following is least likely to be a bias in the top-down analysis model? A) Econometric models may be slow in capturing changes in individual factors B) Individual managers tend to be more optimistic than is warranted by the model .in C) Models may be incorrectly speci ed using the wrong variables en tre Question #80 of 99 Given a current P/10-year MA(E) of 18.35 and an historical mean of 16.3, which of the following statements is the most accurate interpretation of this data? bo ok c A) The market is under-valued and will revert back to the historical mean of 16.3 B) The market is over-valued and will revert back to the historical mean of 16.3 C) The earnings would need to be adjusted to re ect "real earnings" before an m interpretation could be made .o Greg Wright, CFA, and Phil Bishop, CFA, are analysts and market forecasters for Far Horizons w w Forecasting, Inc or FHF They use a variety of data in their analysis, and Wright and Bishop have found it cost e ective to use publicly available data from the Bureau of Labor Statistics as well w as market data such as the yields of xed income instruments of various maturities Wright and Bishop have found in ation to be one of the most important inputs They include the new announcement each quarter as it is released for the current quarter Wright has insisted on using each new announcement for the current quarter His goal is to avoid biases associated with placing too much weight on earlier information received and to allow their opinions to vary from previous opinions However, Bishop has insisted that when in ation announcements deviate too far from the recent past, which in turn leads to a new capital market expectation very di erent from the recent observations, then they should revise the forecast to one closer to the recent average A coworker, Cindy Post, CFA, recently cautioned Wright and Bishop concerning how in ation announcements must be used with caution She says that the composition of the index, i.e., the items included in the index, can change over https://www.kaplanlearn.com/education/dashboard/index/66a9ea0d62bb71ab495925615029a3fd/practice/qbank/24038518/quiz/83450049/print 29/36 10/12/2018 Learning Management System time Daniel Paddington, CFA, also cautioned that the method of calculating the index can change over time, too Post and Paddington caution that any forecasting model that does not account for these factors can lead to misleading results Post and Paddington have been o ering advice concerning other matters Post sees that Wright and Bishop have not been including beta analysis in their capital market expectations Post says that beta research is appropriate for capital market expectations because this research relates to systematic risk, which a ects the whole market In forming capital market expectations, Paddington feels they should also begin using alpha research, which addresses the movement of prices of assets within classes .in The movements of short-term interest rates and bond yields as well as trends in the aggregate inventory-to-sales ratio are among the other inputs that Wright and Bishop already use in en tre forming their capital market expectations This is public data that Wright and Bishop nd helpful in determining the present state of the economy Currently they are observing that the rates on both Treasury bills and long-term Treasury bonds are increasing Wright and Bishop also observe that the aggregate inventory-to-sales ratio is decreasing Wright feels this is a bo ok c good sign for business activity, but Bishop is pessimistic Wright and Bishop have recently tried to build models for forecasting exchange rates They have considered the various approaches: purchasing power parity, relative economic strength, capital ows and savings-investment imbalances They have decided to combine purchasing o m power parity and relative economic strength for a more complete theory w w Question #81 of 99 Wright's insistence that the newest in ation forecast be included in the model and Bishop's w insistence to adjust extreme forecasts are examples of: A) falling into the anchoring trap while attempting to avoid the status quo trap, respectively B) attempting to avoid the anchoring trap but a possibility of falling into the status quo trap, respectively C) attempting to avoid both the anchoring trap and the status quo trap Question #82 of 99 https://www.kaplanlearn.com/education/dashboard/index/66a9ea0d62bb71ab495925615029a3fd/practice/qbank/24038518/quiz/83450049/print 30/36 10/12/2018 Learning Management System With respect to the cautionary notes concerning in ation announcements given by Post and Paddington: A) both are incorrect B) both are correct C) Post is correct and Paddington is incorrect .in Question #83 of 99 Based on Wright and Bishop's observation concerning short-term and long-term rates, they en tre should assess that the economy is in: A) a recession C) an early expansion m Question #84 of 99 bo ok c B) a late expansion .o With respect to the advice that Post and Paddington o er concerning the use of beta research w w and alpha research, respectively, in the forming of capital market expectations: A) Post is correct and Paddington is incorrect w B) Post is incorrect and Paddington is correct C) both Post and Paddington are correct Question #85 of 99 There is a traditional interpretation to changes in the aggregate inventory-to-sales ratio With respect to the mentioned trend in the aggregate inventory-to-sales ratio and the reaction by Wright and Bishop, we would most likely say: A) that Wright is using the traditional interpretation and Bishop is not https://www.kaplanlearn.com/education/dashboard/index/66a9ea0d62bb71ab495925615029a3fd/practice/qbank/24038518/quiz/83450049/print 31/36 10/12/2018 Learning Management System B) both Wright and Bishop are using di erent versions of the traditional interpretation C) that Bishop is using the traditional interpretation and Wright is not Question #86 of 99 With respect to forecasting exchange rates, combining purchasing power parity (PPP) and relative economic strength for a more complete theory is: A) appropriate because purchasing power parity pertains to long-run equilibrium and in relative economic strength adjusts to short-term announcements en tre B) appropriate because purchasing power parity pertains to short-run announcements and relative economic strength adjusts to long-run equilibrium C) not appropriate because both purchasing power parity and relative economic strength Question #87 of 99 bo ok c are long-term forecasting tools .o country is: m Which of the following would indicate that a country is less a ected by global events? The w w A) small and has a diversi ed economy B) small and has an undiversi ed economy w C) large and has a diversi ed economy Question #88 of 99 Which of the following statements regarding interest rates and yields is most accurate? A) Short-term rates are independent of the yields on long-term bonds B) An increase in short-term rates increases the yields on long-term bonds https://www.kaplanlearn.com/education/dashboard/index/66a9ea0d62bb71ab495925615029a3fd/practice/qbank/24038518/quiz/83450049/print 32/36 10/12/2018 Learning Management System C) An increase in short-term rates may increase or decrease the yields on long-term bonds Question #89 of 99 Which of the following would indicate the greatest stimulation of economic growth? A) Tax receipts increase due to changes in the economy .in B) Tax receipts increase due to a new government policy en tre C) Tax receipts decline due to a new government policy bo ok c Question #90 of 99 In the early expansion phase of the business cycle stock prices are: A) stagnant as they are in the later stages of an expansion B) rising at a faster rate than they are in the later stages of an expansion w w o m C) rising at a slower rate than they are in the later stages of an expansion Question #91 of 99 w The following table re ects economic data for market EM Expected growth in real economic output 3.0% Expected growth in the labor 2.0% Expected growth in capital stock, α = 0.7 1.2% Using the Cobb Douglas production function and the data provided, the Solow residual is closest to: A) 1.2% B) 1.6% https://www.kaplanlearn.com/education/dashboard/index/66a9ea0d62bb71ab495925615029a3fd/practice/qbank/24038518/quiz/83450049/print 33/36 10/12/2018 Learning Management System C) 2.0% Question #92 of 99 Suppose the United States has a persistent current account de cit Which of the following approaches to forecasting currencies best explains why the U.S dollar will be strong during this time period? A) The savings-investment imbalances approach en tre Question #93 of 99 bo ok c C) The relative economic strength approach .in B) The capital ows approach Which of the following is consistent with a steeply upwardly sloping yield curve? A) Monetary policy is expansive while scal policy is restrictive m B) Monetary policy is restrictive and scal policy is restrictive w w o C) Monetary policy is expansive and scal policy is expansive w Question #94 of 99 Which of the following statements least likely represents a scenario from an exogenous shock? A) A country defaults on its debt payments, thereby causing the country’s currency to lose value and forcing the central bank to take measures to stabilize the banking system and h B) Political unrest in the Middle East leading to an unexpected decrease in oil production, increased oil prices, decreased consumer spending, increased unemployment, and a l d C) OPEC not being able to agree on production levels leading to increased uncertainty in global markets and increased oil prices https://www.kaplanlearn.com/education/dashboard/index/66a9ea0d62bb71ab495925615029a3fd/practice/qbank/24038518/quiz/83450049/print 34/36 10/12/2018 Learning Management System Question #95 of 99 A long-short, market neutral strategy is most likely indicative of which kind of forecasting technique to predict returns? A) Bottom up B) Combination of both top down and bottom up .in C) Top down en tre Question #96 of 99 Which of the following is NOT a governmental structural policy that would promote the long- bo ok c term growth in an economy? A) A promotion of competition B) Minimal government interference in the economy .o m C) A redistributive tax system w w Question #97 of 99 The use of appraisal data, relative to actual returns, results in: w A) correlations that are biased upwards and standard deviations that are biased upwards B) correlations that are biased upwards and standard deviations that are biased downwards C) correlations that are biased downwards and standard deviations that are biased downwards Question #98 of 99 https://www.kaplanlearn.com/education/dashboard/index/66a9ea0d62bb71ab495925615029a3fd/practice/qbank/24038518/quiz/83450049/print 35/36 10/12/2018 Learning Management System Which of the following regarding the setting of capital market expectations is least accurate? A) When a fairly constant set of experts is polled, this method is referred to as panel method B) Analysts should adjust the forecasts from quantitative models using judgment, when appropriate C) Surveys of practitioners have found them to be consistently more pessimistic than that in of academics en tre Question #99 of 99 Suppose that Government A decreased the tari on foreign goods and that Government B has moved to a lower marginal tax rate Analyzing the e ects on the long-term growth rate in the economy, which of the following would be most accurate? bo ok c A) Government A’s growth rate will increase and Government B’s growth rate will increase B) Government A’s growth rate will decrease and Government B’s growth rate will decrease w w w o increase m C) Government A’s growth rate will decrease and Government B’s growth rate will https://www.kaplanlearn.com/education/dashboard/index/66a9ea0d62bb71ab495925615029a3fd/practice/qbank/24038518/quiz/83450049/print 36/36 ... market is over or under priced B) A 10 year moving average P/E ratio greater than the current P/E ratio for a market indicates the market is currently undervalued https://www.kaplanlearn.com/education/dashboard/index/66a9ea0d62bb71ab495925615029a3fd/practice /qbank/ 24 038 518/quiz/ 834 50049/print... shorter-term cash instruments and from less credit worthy instruments to more credit worthy instruments C) shift from shorter-term cash instruments to longer-term cash instruments and from more credit... from longer-term cash instruments to shorter-term cash instruments and from more credit worthy instruments to less credit worthy instruments B) shift from longer-term cash instruments to shorter-term