CIMA Global Capital Markets 2

Question 1

Which mechanism allows investors to profit when a foreign stock rises but the local currency depreciates against the USD?

Accepted Answer

Currency overlay strategy

Answer

A currency overlay strategy lets a portfolio manager separately manage currency exposure to preserve equity gains even when the foreign currency weakens.

Question 2

In the context of global bond markets, a 'Brady Bond' is best described as:

Accepted Answer

A restructured emerging-market sovereign debt instrument collateralized by U.S. Treasuries

Answer

Brady Bonds were created in the late 1980s to restructure defaulted emerging-market sovereign loans into tradable bonds, partially backed by zero-coupon U.S. Treasuries.

Question 3

The 'Tobin Tax' proposed in international finance is a tax levied on:

Accepted Answer

Short-term currency exchange transactions

Answer

James Tobin proposed a small tax on spot foreign exchange transactions to dampen speculative short-term currency trading while allowing long-term capital flows.

Question 4

Which of the following best characterizes a 'dark pool' in global equity markets?

Accepted Answer

A private trading venue where large orders execute without pre-trade transparency

Answer

Dark pools are private alternative trading systems that allow institutional investors to execute large block orders anonymously, avoiding market impact from pre-trade disclosure.

Question 5

A global investor observing that real interest rates in Country A are significantly higher than in Country B would, under uncovered interest rate parity, expect:

Accepted Answer

Country A's currency to depreciate relative to Country B's

Answer

UIP predicts that the higher-interest-rate currency will depreciate to eliminate arbitrage, offsetting the interest rate advantage for foreign investors.

(CIMA) Certified Investment Management Analyst Practice Test

(CIMA) Certified Investment Management Analyst Practice Test

CIMA Global Capital Markets 2