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BLOOMBERG MARKET CONCEPTS 2025 EXAM
QUESTIONS &
ANSWERS SCORE A+
How accurately do GDP portray the economy and why? Inaccurately because the scope of GDP measurements can change. Consider the formula GDP = C+I+G+(X-M). A country is undergoing a boom in consumption of domestic and foreign luxury goods. In one year, the dollar growth in imports is greater than the dollar growth in domestic consumption. Assuming nothing else has changed, what happened to GDP? It went down what is the meaning of each letter in the GDP formula, C+I+G+(X-M). C= Consumer spending I = Investment (Gross Fixed Capital Formation) G= Government Spending X= Exports M= Imports Here is the most important economic data for Australia and Sweden. which economy did better year-over-year (YOY) in the fourth quarter of 2013 compared to the fourth quarter of 2012? Use the two charts to investigate.
Sweden performed better In the United States, why is there a strong correlation between unemployment and GDP? Consumer spending accounts for two-thirds of the U.S. economy when the number of unemployed consumers rises, there is less consumer spending. Here is a chart showing both nominal GDP growth and real GDP growth for a country. Which of the following can be a true statement at the time the chart was captured? The country has deflation. The bottom line is nominal growth and the top line is real growth. Which of the following lines is the best leading economic indicator? PMI What typically happens to nonfarm payrolls, the PMI indicator, and housing starts at the onset of a recession in the United States? Nonfarm payrolls go down, the PMI indicator goes DOWN, the housing starts goes down. Which of the following qualities of economic indicators do investors prize the most? Timeliness of release Why is the release of GDP statistics less interesting to investors than the release of other economic indicators? Because GDP statistics are released well after other economic indicators.
Which driver weakened the Swiss franc? A surprise change in inflation expectations What does the Big Mac index show? How currencies may be overvalued or undervalued. Which of the following are short-term drivers of currency valuation? Surprise changes in interest rates, inflation, and trade. By what mechanism do interest rates affect currency values? Global investors are attracted by higher bond yields in high interest rate countries. Which of these headlines could move a currency pair? U.S. Stocks rally on Fed's Surprise reduction of Interest Rate. What is the most common target inflation rate for an advanced economy? 2% What was the primary goal of Abenomics? To halt the vicious cycle of deflation
Here is the vicious deflationary cycle. What step connects the lower left gray arrow to the upper right blue arrow? prices decline Were the two oil crises in the 1970s linked to deflation or inflation? Inflation Why would Jack Welch suggest putting all company plants on barges? To respond quickly to changes in the currency markets. Legendary investor Warren Buffett said, "Gold gets dug out of the ground..... Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their head." Based on this quotation, what quality of gold is he referring to? Its storage costs Which of the following options is the best way for investors to manage currency risk? By locking in forward rates for known foreign payments. What quality of U.S. government bonds causes investors to buy them when market volatility rises? U.S. government bonds are considered low risk.
What is true of both the U.K. and the U.S.? Both countries are highly creditworthy. Which would you prefer A 4% annual yield on a credit risk-free 10-year government bond from the mythical country of Utopia. Which would you prefer? A 5% annual yield on an investment in 10-year U.S. government bonds What is the primary reason for U.S. government bond yields to ripple through the bond market? The large government bond market competes for investors attention via yields A rise in which of the following measures would typically send a government bond price up? Creditworthiness How do investors compare bonds? by comparing the yields of single bonds Which of the following is the strongest driver of inflation? wartime activities
Investors who fear rising inflation may buy Treasury Inflation Protected Securities (TIPS). How do TIPS shield lenders from inflation? By compensating investors for inflation What is the Federal Reserve's favorite inflation gauge? Core PCE Why does the yield curve naturally slope upwards. To compensate leaders for the greater risk of long-term loans compared to short-term loans What impact will a tightening of the corporate spread most likely have on a company? A tendency to expand the borrowing capacity of the company. What are the three main transmission mechanisms by which the yield curve affects the economy? Corporate impact, global impact, consumer impact. The purchase of which of the following products is most affected by interest rates? A house What is the primary driver of the left-hand end of the yield curve? Central bank interest rates
What does the release of earnings announcements have in common with the release of economic indicators? Both are estimated in advance by analysts. Engines are the most expensive, heavy component on an aircraft and are designed with detailed specifications. Which of the following would likely be the best theme for a Rolls-Royce analyst research note to help a portfolio manager decide between investing in Rolls-Royce or United Technologies? A comparison of the commercial prospects of new aircraft models You are building a financial model of a bifocal lens manufacturer. Which of the following is the best driver to use? Median age of society When an analyst is looking at a company for the first time, which of the following four activities does he do first? Defines the industry or industries in which the company operates. Company X was expected to have earnings per share of $0.52 for the upcoming quarter. On the day of the results, the company reported earnings per share of $0.83. What happened to the share price when the stock market opened? There is not enough information to tell.
Widget Co has a market capitalization of $100 million. it does a 10-for-1 stock split. it then does a 1-for-16 reverse stock split. Finally, it does a 35-for-1 stock split. Nothing else changes. what's the new market cap? $100 million What input do both absolute valuation and relative valuation typically require? Short-term forecasts What is a reason one discounts future cash flows as part of the absolute valuation process? Future profits are uncertain. How is enterprise value calculated? Enterprise value = market cap - cash + debt Which of the following assigns the same relative weightings to short-term and long-term outcomes as the absolute valuation process? A fishery exceeding fishing quotas A rise in which of the following inputs will increase an absolute valuation? Earnings estimates how do earnings yields differ from bond yields?
