金融專業(yè)英語(yǔ)證書考試FECT模擬試題及答案6

1、2012年金融專業(yè)英語(yǔ)證書考試FECT模擬試題及答案-6SECTION ONE (Compulsory)：Answer all ten questions in this section. Each question carries 1 mark. 1. Multiple-choice questions: from the following four options, select a correct and fill in its labeling the brackets. (A total of 10 points) 1. Suppose the demand for tea is

2、very price-elastic. To increase revenue, the tea supplier should _ the price level. A. Increase B. Decrease C. Not change D. Uncertain 2. Which of the following would NOT cause a shift upward of the consumption schedule? () A. An increase in household wealth. B. An expectation of rising incomes in t

3、he future. C. A reduction in income taxes. D. An increase in household disposable income. 3. An increase of $1,000 in bank deposits will: () A. Result in a higher level of inflation. B. Mean proportionately increased bank profits. C. Facilitate the credit creation process. D. Bring about government

4、intervention in the working of the banking system. 4. A rising foreign exchange rate for country X will: () A. Result in a rise in Xs RPI. B. Be likely to raise the employment level in X. C. Favor those holidaying in X from abroad. D. Ease inflationary pressures with X. 5. Cutting taxes can lower in

5、vestment through its impact on interest rates. This is an example of the: () A. Income effect. B. Accelerator effect. C. Crowding out effect. D. Multiplier effect. 6. Which one of the following is the most widely used measure of inflation? () A. The Consumer Price Index. B. The Index of Leading Econ

6、omic Indicators. C. The prime rate. D. The Federal Funds rate. 7. You have just won the lottery (congratulations!) and are given the option of receiving $2,000,000 now or an annuity of 200,000 at the end of each year for thirty years. Which of the following is correct? () (assume you are making the

7、decision based on present values) A. You cannot choose between the two without first computing future values. B. You will always choose the lump sum regardless of interest rates. C. Comparing the future value of each will lead to the same decision as comparing present values. D. You will always choo

8、se the annuity. E. You will choose the lump sum if interest rates are 7%. 8. A company buys 10 items at a price of £200 each, all on 14 days free credit. It then sells on the next day 5 units for £350 each. One item was sold for cash, the remainder on 21 days free credit. What effect do th

9、ese transactions have on the firms cash flow on the day of the sale? () A. Gains £750 B. Gains £1,750 C. Loses £2,000 D. Gains £350. 9. A firm has fixed costs of £100,000 per month and variable costs of £25 for item. It sells them for £50 each. If it sells 5,000 un

10、its each month, what is the firms Margin of Safety? () A. 1,000 units per month B. £50,000 C. 1,000 units D. 25%. 10. Fred Perry, CFA, purchased $100,000 of a newly issued Treasury inflation protection security based on the following characteristics and information. The coupon payment at the en

11、d of one year is closest to: () A. $2,000. B. $2,100. C. $5,000.SECTION TWO(Compulsory)：Answer the questions in this section. Reading Comprehension: (10 points) Arnold Barker is an analyst at BAYCON Investments. He has been asked to revise BAYCONs credit analysis process for corporate fixed-income s

12、ecurities. This credit analysis process is the basis for the selection of individual bonds for BAYCONs fixed-income portfolios. Hank Su, Barkers supervisor, comments that one limitation of the current credit analysis process at BAYCON is that it only provides an estimate of a bonds default risk. He

13、asks Barker to expand the credit analysis process to provide an estimate of a bonds credit spread risk. Su defines credit spread risk as follows: "Credit spread risk is the risk that the issuer will fail to satisfy the terms of the bond with respect to payments.” In addition, Su believes that t

14、he current credit analysis process focuses too much on character, collateral, and covenants, and not enough on capacity. In response to Sus observations, Barker develops a quantitative debt-capacity model to assess the capacity of an issuer to meet its obligations. His debt-capacity model is based o

15、n the issuers profitability, debt coverage, and cash flow analysis. Barker decides to use the model to evaluate Haynes Industries, a recent investment-grade bond issuer. To calculate the inputs to the debt-capacity model, Barker gathered selected financial data, displayed in Exhibit 1, on Haynes Ind

16、ustries. Exhibit 1 Selected Financial Data for Haynes Industries (In millions) Barker also decides to look at several key ratios used by Standard & Poors and other credit analysts, including coverage ratios, solvency ratios, and "funds from operations / total debt." Ed Dawson, a fixed-

17、income research manager at BAYCON, has reviewed Barkers debt-capacity model and makes the following statements about the models applicability to high-yield bonds, asset-backed securities, and municipal bonds: 1. For the model to be useful for high-yield issues, it must consider the entire debt struc

18、ture of the issuer. For example, high-yield issuers rely to a greater extent on bank debt than investment-grade issuers. 2. While the model has limited applicability in the assessment of the credit of asset-backed securities, it can be used to evaluate the quality of the service. However, it cannot

19、be used to assess the underlying collaterals ability to generate cash flows. 3. The credit analysis of municipal tax-backed bonds should involve assessing the issuers: debt structure, ability and political discipline to maintain sound budgetary policy, local tax base and intergovernmental revenues a

20、vailable, and flow of funds structure. Part 1) Sus definition of credit spread risk is: () A. Correct. B. Incorrect, because credit spread risk is the risk that a bonds price will fall when the bonds risk premium increases while the yield on a similar maturity Treasury bond falls. C. Incorrect, beca

21、use credit spread risk is the risk that a bonds price will fall when the bonds risk premium decreases while the yield on a similar maturity Treasury bond rises. D. Incorrect, because credit spread risk is the risk that a bonds price will fall when the bonds risk premium remains constant while the yi

22、eld on a similar maturity Treasury bond rises. Part 2) The "funds from operations / total debt" ratio for Haynes Industries for 2004 was closest to: () A. 50.5%. B. 52.1%. C. 54.2%. D. 63.5%. Part 3) For 2004, compared with 2003, did Haynes Industries have an increase or decrease in: () A.

23、 Answer A. B. Answer B. C. Answer C. D. Answer D. Part 4) Given the debt structure described in Dawsons first statement, the factor that is least likely to affect the creditworthiness of the high-yield issuer is the: () A. Ability to refinance. B. Impact of sale of assets. C. Presence of senior bond

24、s in the debt structure. D. Impact of changes in short-term interest rates. Part 5) Regarding Dawsons second statement that refers to asset-backed securities is he correct or incorrect in describing the models ability to: () A. Answer A. B. Answer B. C. Answer C. D. Answer D. Explanations of terms：(

25、10 points) 1. Liquidity trap 2. Recognition lag 3. Group of Seven (G-7) 4. Municipal bonds 5. Grid lock Question3: How do the Commercial Banks create the Money? Question4: What Is Reserve Management and Why Is It Important？ Question5: Facing with the rapid economic development, what is the Requireme

26、nt for Financial Globalization? Question6: What are the Advantages and disadvantages of reserve requirements?參考答案1. B D C D B , A,C ,D A B Reading Comprehension: (10 points) Part 1) Your answer: A was correct! Distinguish among default risk, credit spread risk, and downgrade risk. Credit spread risk

27、 is the risk an issuers debt obligation will relatively decline due to an increase in the credit spread. In this case the credit spread is increasing and the bonds price will fall. Part 2) Your answer: C was correct! Calculate, critique, and interpret the key financial ratios used by credit analysts

28、. Funds from operations / total debt = 7,672 / 14,147 = 54.23%. Funds from operations is defined as (Net Income + Depreciation & Amortization + Other non-cash charges) = (5,186 + 1,703 + 783) = 7,672. Total debt is defined as (Current Maturity of LTD + Long-Term Debt + Lease Debt Equivalent) = (

29、2,172 + 11,475 + 500) = 14,147. Part 3) Your answer: B was correct! Calculate, critique, and interpret the key financial ratios used by credit analysts. The interest coverage ratio (EBIT (EBITDA) / interest expense increased from 8.97 (9.89) in 2003 to 10.40 (11.38) in 2004, and short-term solvency

30、decreased from 1.358 in 2003 to 1.128 in 2004 where: *Current Liabilities = Current Assets - Working Capital 2004: Current Liabilities = 8,668 - 984 = 7,684 2003: Current Liabilities = 8,232 - 2,168 = 6,064 Part 4) Your answer: C was correct! Identify, explain, and interpret the typical elements of

31、the corporate structure and debt structure of a high-yield issuer and the impact of these elements on the risk position of the lender. Bank loans have a priority over other debt issues; therefore the presence of senior bonds in the debt structure will have little impact on the credit analysis of hig

32、h-yield issuers. Part 5) Your answer: C was correct! Discuss the factors considered by rating agencies in rating asset-backed securities. In the case of an asset-backed security, the quality of the service is evaluated using factors such as servicing history, underwriting standards for loan originat

33、ion, servicing capabilities, business environment, and financial condition. The model will only address financial condition. Dawson is correct in stating that the model cannot be used to determine the ability of the underlying collateral to generate cash flows. Explanations of terms：(10 points) 1. L

34、iquidity trap：As the money supply increases the supply-of-money curve intersects the demand-for-money curve at flat part of the latter where an increase in the money supply no longer reduce the interest rate. This flat portion of the demand-for-money is called liquidity trap, which illustrates that

35、the interest rate is insensitive to the increase of the money supply and peoples demand for money becomes infinitely large at the flat portion of the demand-for-money. 2. Recognition lag：The recognition lag is the period that elapses between the time at which economic situation changes and the time

36、at which the policymaking officials become aware of the need for action. This time lag could be negative if the disturbance can be predicted and appropriate policy actions considered before it even occurs. 3. Group of Seven (G-7)：Seven of the worlds leading countries that meet periodically to achiev

37、e a cooperative effort on international economic and monetary issues。 4. Municipal bonds：Bond issued by a state, city, or local government. Municipalities issue bonds to raise capital for their day-to-day activities and for specific projects that they might be undertaking (usually pertaining to deve

38、lopment of local infrastructure such as roads, sewerage, hospitals etc.). 5. Grid lock：A government, business or institutions inability to function at a normal level due either to complex or conflicting procedures within the administrative framework or to impending change in the business. Question3：

39、 Answer: One of the distinguishing features of commercial banks that separate them from other non-banking financial institutions is their ability to create money by their lending and investing activities in cooperation with the national central bank. Under the two-tier banking system, commercial ban

40、k is a very important link in money supply. The general size of money supply and its structure is directly related to commercial banks business activities. As money creation by commercial banks is discussed in Section 1, we wont elaborate on it again here, but only focus on the money supply by the c

41、entral bank. Question4： Answer: Reserve management is a process that ensures that adequate official public sector foreign assets are readily available to and controlled by the authorities for meeting a defined range of objectives for a country or union. In this context, a reserve management entity i

42、s normally made responsible for the management of reserves and associated risks. Typically, official foreign exchange reserves are held in support of a range of objectives, including to support and maintain confidence in the policies for monetary and exchange rate management, including the capacity

43、to intervene in support of the national or union currency; limit external vulnerability by maintaining foreign currency liquidity to absorb shocks during times of crisis or when access to borrowing is curtailed, and in doing so provide a level of confidence to markets that a country can meet its ext

44、ernal obligations; demonstrate the backing of domestic currency by external assets; assist the government in meeting its foreign exchange needs and external debt obligations; and maintain a reserve for national disasters or emergencies. Sound reserve management practices are important because they c

45、an increase a countrys or regions overall resilience to shocks. Through their interaction with financial markets, reserve managers gain access to valuable information that keeps policymakers informed of market developments and views on potential threats. The importance of sound practices has also be

46、en highlighted by experiences where weak or risky reserve management practices have restricted the ability of the authorities to respond effectively to financial crises, which may have accentuated the severity of these crises. Moreover, weak or risky reserve management practices can also have signif

47、icant financial and reputational costs. Several countries, for example, have incurred large losses that have had direct, or indirect, fiscal consequences. Accordingly, appropriate portfolio management policies concerning the currency composition, choice of investment instruments, and acceptable dura

48、tion of the reserves portfolio, and which reflect a countrys specific policy settings and circumstances serve to ensure that assets are safeguarded, readily available, and support market confidence. Sound reserve management policies and practices can support, but not substitute for, sound macroecono

49、mic management. Moreover, inappropriate economic policies (fiscal, monetary and exchange rate, and financial) can pose serious risks to the ability to manage reserves. Question5： Answer: The crucial message of the financial liberalization thesis is that it is the lack of competition, which brings in

50、efficiency to the financial sector. Interest rate liberalization is a first step, but it was recognized that this alone would not generate competition in this market, since this market operates within the frame of oligopolistic competition. Consequently, not only is there a need to increase the numb

51、er of players in this market, but also to tap a larger pool of savings, which a country may be required to seek beyond its own domestic boundary. To increase the number of players there is a need to remove entry restrictions so that other banks and Non-Bank Financial Intermediaries (NBFI) as well as

52、 overseas banks can enter into this market. In order to tap a larger pool of savings, there is a need to remove controls over the purchase and sale of foreign currency. There is also need to relax laws relating to takeover and merger activities, and, consequently, the requirement arises to liberaliz

53、e the external sector of the financial system. A view thereby emerged, similar to that of the school of financial liberalization, that government intervention in the foreign exchange market to determine the price of currency, could cause a great deal of distortion in the allocation of exports and im

54、ports. So much, that an undesirable imbalance between imports and exports may ensue (Krueger, 1974; Cordon, 1981). This problem might have been further aggravated by the undue restriction on foreign direct investment. That may have caused debt to rise to an unnecessarily high level which otherwise c

55、ould have been addressed via foreign direct investment. The important implication of all that was that if the currency were allowed to float, then the mechanism of its appreciation and depreciation would ultimately bring a balance between exports and imports. This is, of course, the familiar adjustm

56、ent process known as the J-curve effect, according to which devaluation would initially adversely affect the current account deficit, but after that it would improve the situation continuously (Cordon, 1981). Any remaining trade imbalance could be addressed via directly inviting foreign direct inves

57、tment. Accordingly, country after country joined the currency float fashion and the removal of financial controls. Also laws relating to takeover and merger activities were relaxed in anticipation that the threat of a takeover may improve the performance of those otherwise not performing as expected. In other words, the external sector of the financial system also had to be liberalized. Internal and external liberalization of the financial sector was undertaken with the expectation that this would bring efficiency to this sector. This in turn would improve the growth performa