CIMA Global Capital Markets 3

Question 1

The 'carry trade' strategy in currency markets involves:

Accepted Answer

Borrowing in low-interest-rate currencies and investing in high-interest-rate currencies

Answer

A carry trade borrows in a low-yield currency (funding currency) and invests in a higher-yield currency, profiting from the interest rate differential unless exchange rates move adversely.

Question 2

Which institution serves as the 'lender of last resort' for sovereign governments facing balance-of-payments crises in the global monetary system?

Accepted Answer

International Monetary Fund (IMF)

Answer

The IMF provides emergency liquidity and conditional lending programs to member countries experiencing balance-of-payments difficulties.

Question 3

A 'Yankee bond' is defined as:

Accepted Answer

A foreign bond issued in the U.S. market denominated in USD by a non-U.S. entity

Answer

Yankee bonds are USD-denominated bonds issued in the United States by foreign corporations or governments, subject to SEC registration requirements.

Question 4

In global equity markets, the phenomenon where correlations between international markets increase dramatically during financial crises is known as:

Accepted Answer

Contagion or correlation breakdown

Answer

Contagion refers to the tendency for global market correlations to spike during crises, reducing the diversification benefits investors expected under normal conditions.

Question 5

The Basel III framework primarily addresses capital adequacy for global banks by requiring:

Accepted Answer

Higher quality and quantity of regulatory capital plus liquidity coverage ratios

Answer

Basel III strengthened capital quality requirements (common equity tier 1), introduced capital buffers, and added liquidity standards (LCR and NSFR) to improve bank resilience.

(CIMA) Certified Investment Management Analyst Practice Test

(CIMA) Certified Investment Management Analyst Practice Test

CIMA Global Capital Markets 3