24 CFA Level 2 Mock Exam 2015 Questions and Answers on Economics

If you are looking for an effective CFA practice exam, 24 CFA Level 2 Mock Exam 2015 Questions and Answers on Economics is one of the best choice for you. Those questions are developed in an explicit way to ensure all must-have information of economics is presented in an straight-to-the-point and easy-to-understand layout. Therefore, you will master the necessary material much more and find out which your weaknesses and strengths are. Not only leading you throughout the entire content of this topic area in the curriculum, free CFA practice exam questions also provide with a highlight of exam-focused questions to assist in your exam prep process. Test it to get more comfortable experience of exam testing!
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Spreads are increasing with maturity in general due to liquidity, counterparty and interest rate risk.

• Forward premium
• Cross rate
• Spreads and forwards
• Ask v. Offer

Exchange rate between two currencies implied by their exchange rates with a common third currency. Calculating these is simply unit conversion.

• Absolute PPP
• Relative PPP
• Ask v. Offer
• Cross rate

Interbank rates (duh)Size (larger size, larger spread)Relationship (can be important)

• Spreads and forwards
• Interbank spread factors
• Current account
• Dealer spread factors

R Nominal A - R nominal B = E inflation A - E inflation BIn other words, real rates are assumed to be constant (IRP) so differences in nominal rates are all about inflation

• Interbank spread factors
• Triangular arbitrage
• International Fisher Effect
• Relative PPP

A currency is quoted at a forward premium relative to a second currency if the forward price in units of the second currency is higher than the spot price. A forward discount is, shockingly, the opposite. Can calculate it as Forward price - spot price

• Fisher equation
• Cross rate
• Forward premium
• Current account

(FPt - FP) * contract size where FPt is the current time, and FP is the original price agreed to.Well this is pretty obvious, isn't it?

• Forward premium
• Value of a forward prior to expiration
• Value of a forward at maturity
• Value of a forward an initiation

They mean the same thing.

• Absolute PPP
• Cross rate
• Ask v. Offer
• Relative PPP

Nominal R = Real R + Inflation

• Fisher equation
• Forward premium
• Ask v. Offer
• Cross rate

Exchange of goods, services, investment income, and gifts. Summarizes whether a country is selling more goods to a country than it is buying from it, which is a current account surplus.

• Current account
• Cross rate
• Office reserve account
• Forward premium

Requires LOOP across countries, pretty simple concept

• Cross rate
• Relative PPP
• Absolute PPP
• Ask v. Offer

spread. Often quoted in pipsBuy at ask, Sell at bid

• Interbank spread factors
• International Fisher Effect
• Difference between bid and offer
• Office reserve account

Changes should offset the price impacts of an inflation differential

• Relative PPP
• Cross rate
• Ask v. Offer
• Absolute PPP

Capital flows

• Dominant factor influencing exchange rates
• How the current account impacts exchange rate
• Difference between bid and offer
• Portfolio Composition Mechanism

which currencies are involvedtime of day (if both Lon and NYC are open, more liquidity)Volatility (higher vol, higher spreads)

• Spreads and forwards
• Triangular arbitrage
• Dealer spread factors
• Interbank spread factors

They increase supply of a given currency in foreign markets (makes sense). This should (theoretically) depreciate the currency as restore the deficit to balance. Depends on:1) the size of the initial deficit2) Influence of FX on prices3) Influence of price changes (from FX) on demand for goods

• Current account
• Dominant factor influencing exchange rates
• How the current account impacts exchange rate
• Financial account (capital account)