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Question 1 of 10
1. Question
Which of the following statements is true about a weak dollar?
I. It can only be exchanged for smaller amounts of foreign currency than its present value.
II. It is bad for an economy as it tends to reduce growth by raising demand for exports due to their low cost.
III. The country with the weaker currency imports more to boost economic growth.
IV. It increases exports from the country with the weak dollar.Correct
A weak dollar is a dollar (or unit of currency) that can only be exchanged for smaller amounts of foreign currency than its present value. When a specific country’s currency is weaker than other countries’ currencies with whom the country transacts business, its exports tend to sell more frequently. This is due to the fact that the countries with stronger currencies effectively buy the exports at a discount, given that their currencies are worth more than the selling country. The country with the weaker currency imports less due to the imports requiring more of the weaker currency; thus the imports sell at a premium. A weak dollar is not necessarily bad for an economy as it tends to stimulate growth by raising demand for exports due to their low cost.
Incorrect
A weak dollar is a dollar (or unit of currency) that can only be exchanged for smaller amounts of foreign currency than its present value. When a specific country’s currency is weaker than other countries’ currencies with whom the country transacts business, its exports tend to sell more frequently. This is due to the fact that the countries with stronger currencies effectively buy the exports at a discount, given that their currencies are worth more than the selling country. The country with the weaker currency imports less due to the imports requiring more of the weaker currency; thus the imports sell at a premium. A weak dollar is not necessarily bad for an economy as it tends to stimulate growth by raising demand for exports due to their low cost.
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Question 2 of 10
2. Question
The following statements are true except:
I. Gross domestic product (GDP) consists of the collective total production of a given economy.
II. If the GDP is keeping an even pace, the economy is said to be stable.
III. Inflation tends to have a directly proportional relationship with GDP.
IV. Rapid and excessive growth in GDP is ideal for a growing economy.Correct
Gross domestic product (GDP) consists of the collective total production of a given economy. If the GDP is declining, or even keeping an even pace, the economy is not growing, and companies are not able to expand their profits or benefit investors. Too much growth in GDP, however, is also not good for the economy. Inflation tends to keep pace with GDP. If GDP is racing skyward and inflation paces it, investors’ funds are losing purchasing power because of the increase in general price levels.
Incorrect
Gross domestic product (GDP) consists of the collective total production of a given economy. If the GDP is declining, or even keeping an even pace, the economy is not growing, and companies are not able to expand their profits or benefit investors. Too much growth in GDP, however, is also not good for the economy. Inflation tends to keep pace with GDP. If GDP is racing skyward and inflation paces it, investors’ funds are losing purchasing power because of the increase in general price levels.
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Question 3 of 10
3. Question
Which of the following statements is false?
I. In a falling interest rate environment, investors are willing to pay more to receive the higher yields produced by existing bonds.
II. Yield is a function of the amount invested and the coupon received.
III. The interest rate expense is much
lower with long-term bonds.
IV. Short-term bond values tend not to move as dramatically as long-term bond values.Correct
In a falling interest rate environment, investors are willing to pay more to receive the higher yields produced by existing bonds. Because yield is a function of the amount invested and the coupon received, the yield curve also moves with interest rates. Short-term bond values tend not to move as dramatically as long-term bond values due to the fact that they can be redeemed at par value much more quickly and reinvested in higher-yielding securities if interest rates rise. This also results in a lower coupon (less yield) as the interest rate expense is much lower than with long-term bonds.
Incorrect
In a falling interest rate environment, investors are willing to pay more to receive the higher yields produced by existing bonds. Because yield is a function of the amount invested and the coupon received, the yield curve also moves with interest rates. Short-term bond values tend not to move as dramatically as long-term bond values due to the fact that they can be redeemed at par value much more quickly and reinvested in higher-yielding securities if interest rates rise. This also results in a lower coupon (less yield) as the interest rate expense is much lower than with long-term bonds.
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Question 4 of 10
4. Question
Which of the following is incorrect?
I. GDP is a measure of a nation’s total output.
II. National unemployment rate is an example of a trade deficit indicator.
III. Balance of payments is not a generally accepted economic indicator.
IV. CPI means Consumer Price IndexCorrect
GDP, or gross domestic product, a measure of a nation’s total output
National unemployment rate is an employment indicator.
Balance of payments is an important economic indicator.
CPI means consumer price index.Incorrect
GDP, or gross domestic product, a measure of a nation’s total output
National unemployment rate is an employment indicator.
Balance of payments is an important economic indicator.
CPI means consumer price index. -
Question 5 of 10
5. Question
Which of the following is/are false?
I. Financial statements are transcribed reports of a company’s financial status.
II. Financial statements are often called economic statements.
III. Financial statements and balance of payments serve same function.
IV. Financial statements contain records of dealings between a given country and all other countries with whom it has done business over a particular period of time.Correct
Financial statements are transcribed reports of a company’s financial status.
Incorrect
Financial statements are transcribed reports of a company’s financial status.
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Question 6 of 10
6. Question
Regarding trading authorisations, a full power of attorney will allow the authorized trader to do which of the following?
I. To deposit securities
II. To withdraw funds
III. To make decision about investments
IV. To change the owner of the securityCorrect
A full power of attorney will allow the authorized trader to deposit and withdraw securities and funds and make decisions about investments for the owner.
Incorrect
A full power of attorney will allow the authorized trader to deposit and withdraw securities and funds and make decisions about investments for the owner.
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Question 7 of 10
7. Question
Which of the following is true regarding soft dollars?
I. They are payments made to brokerages in dollar currency
II. They are payments made to brokerages for services rendered
III. They are payments made by the brokerage
IV. They are payments made by promising to trade through a brokerageCorrect
Soft dollars are payments made to brokerages for services rendered by promising to trade through that brokerage.
Incorrect
Soft dollars are payments made to brokerages for services rendered by promising to trade through that brokerage.
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Question 8 of 10
8. Question
What does the term ‘custody’ mean as it relates to securities?
I. Selling the funds and securities of another person.
II. Subscribing to the funds and securities of another person.
III. Possessing authority to acquire funds and securities of another person.
IV. Holding the funds and securities of another person.Correct
The term custody, as it relates to securities describes holding, whether directly or indirectly, the funds and securities of another person or possessing authority to acquire those funds.
Incorrect
The term custody, as it relates to securities describes holding, whether directly or indirectly, the funds and securities of another person or possessing authority to acquire those funds.
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Question 9 of 10
9. Question
Regular statements provided by investment advisers to their custodial clients must contain which of the following?
I. Location of next of kin
II. Value of the account
III. Account transaction
IV. Location of all the client’s assists.Correct
Investment advisers that maintain custody of their clients’ assets are required to provide regular statements to their custodial clients that outline the value of the account, account transactions, and the location of all of the clients’ assets.
Incorrect
Investment advisers that maintain custody of their clients’ assets are required to provide regular statements to their custodial clients that outline the value of the account, account transactions, and the location of all of the clients’ assets.
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Question 10 of 10
10. Question
The code of ethics must require investment advisers to report which of the following?
I. Monthly profit margins
II. Initial securities holdings
III. Daily securities holdings
IV. Annual securities holdingsCorrect
The code of ethics must require that IARs report their initial and annual securities holdings.
Incorrect
The code of ethics must require that IARs report their initial and annual securities holdings.