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2012年金融专业英语证书考试FECT模拟试题及答案-10

2012年金融专业英语证书考试FECT模拟试题及答案-10

SECTION 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. Assume U.S. GAAP (generally accepted accounting principles) applies unless otherwise noted. Which of the following is least likely to be classified as a financial statement element? ()

A. Asset

B. Revenue

C. Liability

D. Net income

2. Amy, a CFA candidate, recently joined A&F Asset Management, and reports directly to Tammy. Shortly after joining the firm, Amy learned that A&F Asset Management does not have a copy of the Code and Standards. Which of the following statements best complies with AIMR Standards of Professional Conduct? ()

A. Amy must deliver a copy of the Code and Standards to Tammy.

B. Amy must notify Tammy, in writing, of her obligation to comply with the Code and Standards.

C. Statement A and B.

D. None of the above.

3. Compared with an otherwise identical amortizing security, a zero-coupon bond will most likely have: ()

A. Less interest rate risk and more reinvestment risk.

B. Less reinvestment risk and more interest rate risk.

C. The same reinvestment risk and less interest rate risk.

D. The same interest rate risk and more reinvestment risk.

4. A futures trader goes long one futures contract at $450. The settlement price 1 day before expiration is $500. On expiration day, the future is trading at $50

5. The least likely way the futures trader will lock in her profits on expiration is: ()

A. Take delivery of the underlying asset and pay $500 to the short.

B. Close out the futures position by selling the futures contract at $505.

C. Take delivery of the underlying asset and pay the expiration settlement price to the short.

D. Cash settle the futures and receive the difference between $500 and the expiration settlement price.

5. Assume U.S. GAAP (generally accepted accounting principles) applies unless otherwise noted. Bishop Ltd. received an advanced payment of $10,000 on December 1, for rent on a property for December and January. On receipt they correctly recorded it as cash and unearned revenue. If at December 31, their year-end, they failed to make an adjusting entry related to this payment, ignoring taxes, what would the effect on the financial statements for the year be? ()

A. Assets are overstated by $5,000 and Liabilities are overstated by $5,000.

B. Liabilities are overstated by $5,000 and Net income is overstated by $5,000.

C. Assets are overstated by $5,000 and Owner’s equity is overstated by $5,000.

D. Liabilities are overstated by $5,000 and Owners’ equity is understated by $5,000.

6. A market participant has a view regarding the potential movement of a stock. He sells a customized over-the-counter put option on the stock when the stock is trading at $38. The put has an exercise price of $36 and the put seller receives $2.25 in premium. The price of the stock is $35 at expiration. The profit or loss for the put seller at expiration is: ()

A. $1.25.

B. $1.00.

C. $1.25.

D. $2.25.

7. As part of an AIMR investigation into the conduct of Helen, CFA, AIMR requests records from Helen about her investment accounts. Helen writes AIMR a letter stating that under Standard IV (B.5), Preservation of Confidentiality that she is unable to comply with their request. Which of the following statement is TRUE? ()

A. Is correct in her interpretation of Standard IV (

B.5).

B. Should not turn over the information because it will violate federal material nonpublic information statutes and AIMR’s Standard V (A) Prohibit against Use of Material Nonpublic information.

C. Will no be in violation of Standard IV (B.5) by turning over the requested information because under the Professional Conduct Program, the Disciplinary Review Subcommittee is considered an extension of Helen.

D. All of the above.

8. Which of the following is the least accurate statement about the short sale of stocks? ()

A. The short seller must pay any dividends due to the lender of shares.

B. A stop buy order would enable a short seller to minimize potential losses.

C. Short sales involve time limits for returning the shares borrowed to the lender.

D. A short sale can be made only on an uptick or a zero uptick trade if the previous trade was an uptick trade.

9. The appropriate measures of free cash flow and discount rate to use when estimating the total value of a firm, respectively, are: ()

2012年金融专业英语证书考试FECT模拟试题及答案-10

A. Answer A.

B. Answer B.

C. Answer C.

D. Answer D.

10. Assume U.S. GAAP (generally accepted accounting principles) applies unless otherwise noted. An analyst gathered the following information from a company’s accounting records:

The analyst’s estimate of net income for 2007 would be closest to: ()

A. $650,000.

B. $850,000.

C. $1,050,000.

D. $1,850,000.

SECTION TWO(Compulsory):Answer the questions in this section.

Reading Comprehension: (10 points)

Kammel Capital Management is an institutional money manager that oversees over $12 billion in client assets. Most of its assets under management are invested in the Kammel Funds, a family of 12 mutual funds encompassing 9 growth and value equity funds, and 3 fixed income funds.

Linda Karazim is an analyst for the Kammel Strategic Income Fund, a flexible fixed-income fund benchmarked to the Lehman Brothers Aggregate Index. The fund owns a substantial portion of subordinated debentures that were issued by Gernot Incorporated to finance the acquisition of a major competitor in 2002. Karazim has been assigned by the Strategic Income Senior Portfolio Manager, Mark Davidson, to analyze the subordinated debt of Gernot, Inc.

Karazim decides that the best way to assess the credit quality of the Gernot’s bonds is to analyze the firm’s financial statements and calculate ratios that will identify trends in the firm’s operations and financing decisions. Karazim searches online and pulls up Gernot’s financial statements for the last three years. The statements Karazim uses for her analysis are shown below:

2012年金融专业英语证书考试FECT模拟试题及答案-10

2012年金融专业英语证书考试FECT模拟试题及答案-10

As Karazim is working on her project, Jacob Cannon, an analyst for Kammel’s Large Cap Growth Fund, stops by Karazim’s office to chat. When Karazim tells him that she is working on a ratio analysis project to assess Gernot Inc.’s subordinated debt, Cannon tells her that Kammel’s growth equity team is potentially looking to purchase Gernot’s stock for their fund. Karazim tells Cannon that the r eturn on assets ratio that she has calculated for evaluating Gernot’s debt rating would also be considered one of the most effective ratios for use in valuing Gernot’s stock. Cannon replies that he has been doing his own ratio analysis to assess Gernot’s systematic risk and one of the most useful ratios for identifying relationships between accounting variables and beta is the current ratio, which would also be useful in forecasting the possibility of Gernot, Inc. going bankrupt.

After Karazim completes her analysis, she has a meeting with Davidson to discuss her findings. At the meeting, Karazim tells Davidson that Gernot’s Inc.’s sustainable growth rate based on 2004 data is 9 percent, and that a growing company has a much lower chance of defaulting on its debt. Davidson, always critical of the work of the analysts that work for him, concludes the meeting by telling Karazim that she did good work, but one of the major limitations of the cross-sectional analysis she has performed is that comparisons are made difficult due to different accounting treatments.

Part 1)

What are Gernot’s total asset turnover for 2004 and the change in the ratio from 2002 to 2004? ()

2004 Ratio Change in Ratio

A 2. 08 decline of 0.18

B 1 .52 decline of 0.56

C 2.08 increase of 0.18

D 1.52 increase of 0.56

Part 2) What is the change in Gernot Inc.’s cash conversion cycle from 2003 to 2004? The cash conversion cycle has: ()

A Increased by 17 days.

B Increased by 33 days.

C Increased by 25 days.

D Decreased by 13 days.

Part 3)

Karazim has noted in her analysis that Gernot Inc.’s return on equity has fallen significantly from 2002 to 2004. Using the extended DuPont system, which of the following components had the most impact on Gernot’s ROE decline? ()

A Financial leverage multiplier.

B Operating profit margin.

C Interest coverage ratio.

D Tax retention rate.

Part 4)

Regarding Karazim’s conversation with Cannon regarding the most useful ratios for various tasks: ()

A Karaz im’s statement is incorrect; Cannon’s statement is incorrect.

B Karazim’s statement is incorrect; Cannon’s statement is correct.

C Karazim’s statement is correct; Cannon’s statement is correct.

D Karazim’s statement is correct; Cannon’s statement is incorrect.

Part 5) Karazim decides to enhance her analysis by creating common size statements for Gernot, Inc. Which of the following statements is CORRECT? A common size balance sheet expresses all balance sheet accounts as a percent of: ()

A Total assets and a common size income statement expressall items as a percentage of net income.

B Sales and a common size income statement expressall items as a percentage of net income.

C Sales and a common size income statement expressall items as a percentage of total assets.

D Total assets and a common size income statement expressall items as a percentage of sales.

Explanations of terms:(10 points)

1. Legal tender

2. Double-entry bookkeeping

3. Arbitrage pricing theory

4. Soft law

5. Gold markets

Question3: What is the Theory of Money Supply by the Monetarist School?

Question4: Explain the Open Market Operations.

Question5:

(1) State the difference between a documentary credit and a documentary collection.

(2) Why is a documentary credit arrangement important to an exporter?

(3) What is the difference between a revocable credit and an irrevocable credit?

Question6: What are the Countering Financial Abuse and Crime? What Others Are Doing?

参考答案

1. D C B C B ,C C C D C

Reading Comprehension: (10 points)

Part 1)

Your answer: B was correct!

The total asset turnover ratio = sales/assets. In 2002, the ratio was (10,424/5,012) = 2.08. In 2004, the ratio was (11,606/7,636) = 1.52. From 2002 to 2004 the ratio declined by (2.08 – 1.52) = 0.56.

Part 2)

Your answer: The correct answer was C!

The cash conversion cycle = (average receivables collection period) + (average inventory processing period) – (payables payment period).

For 2003: Receivables turnover = (sales/average receivables) = 11,718/((625+798)/2) = 11,718/712 = 16.46 Average receivables collection period = (365/receivables turnover) = 365/16.46 = 22.17 days Inventory turnover = (COGS/average inventory) = 7183/((1342+937)/2) = 7183/1140 = 6.3 Average inventory processing period = (365/inventory turnover) = 365/6.3 = 57.94 days. Payables turnover = (COGS/average payables) = 7183/((620 + 544)/2) = 7183/582 = 12.34 Payables payment period = (365/12.34) = 29.58 days 2003 cash conversion cycle = 22.17 + 57.94 –29.58 = 50.53 days. For 2004: Receivables turnover = (sales/average receivables) = 11,606/((1294+798)/2) = 11,606/1046 = 11.10 Average receivables collection period = (365/receivables turnover) = 365/11.10 = 32.88 days Inventory turnover = (COGS/average inventory) = 7150/((1342+1552)/2) = 7150/1447 = 4.94 Average inventory processing period = (365/inventory turnover) = 365/4.94 = 73.89 days. Payables turnover = (COGS/average payables) = 7150/((620 + 597)/2) = 7150/609 = 11.74 Payables payment period = (365/11.74) = 31.09 days 2004 cash conversion cycle = 32.88 + 73.89 – 31.09 = 75.68 days. From 2003 to 2004, the cash conversion cycle increased by (75.68-50.53) = 25.15 days.

Part 3)

Your answer: The correct answer was D!

From 2002 to 2004, ROE declined from (328/1575) = 20.8% to (304/2292) = 13.3%.

The extended DuPont formula states that ROE = [(operating profit margin)(total asset turnover) – (interest expense rate)](financial leverage multiplier)(tax retention rate)

For 2002:

Operating profit margin = (EBIT/sales) = (513 + 147)/10,424 = 0.0633 = 6.33%.

Total Asset Turnover = (sales/assets) = 10424/5012 = 2.08x

Interest Expense rate = (interest expense/assets) = 147/5012 = 2.93%

Financial leverage multiplier = (assets/equity) = 5012/1575 = 3.18

Tax retention rate = (1-tax rate) = 1 – (185/513) = 1 – 0.36 = 64%.

For 2004:

Operating profit margin = (EBIT/sales) = (516 + 340)/11,606 = 0.0738 = 7.38%.

Total Asset Turnover = (sales/assets) = 11,606/7,636 = 1.52x

Interest Expense rate = (interest expense/assets) = 340/7,636 = 4.45%

Financial leverage multiplier = (assets/equity) = 7,636/2,292 = 3.33

Tax retention rate = (1-tax rate) = 1 – (212/516) = 1 – 0.41 = 59%.

Since the operating profit margin and the financial leverage multiplier both increased, these did not have an adverse impact on the ROE. The interest coverage ratio is not part of the DuPont formula. The only viable answer is the tax retention rate, which, in fact did decline significantly.

Part 4)

Your answer: The correct answer was B!

Although return on assets is one of the ratios that bond agencies rely on heavily for deriving their debt

ratings, it is not one of the ratios that is deemed most useful for s tock valuation, therefore Karazim’s statement is incorrect. Return on equity, (not ROA), is a ratio that is deemed to be very effective for both stock valuation and determining credit ratings.

Cannon’s statement is correct – the current ratio is considered to be one of the most effective ratios for both determining systematic risk (beta) based on accounting variables and for forecasting bankruptcy.

Part 5)

Your answer: The correct answer was D!

Common size statements normalize balance sheet items by expressing each item as a percentage of total assets, and normalize income statements by expressing each item as a percentage of sales. Using common size statements allows the analyst to make easier comparisons of different sized firms.

Explanations of terms:(10 points)

1. Legal tender:The status of legal tender simply means that coins and paper currency cannot lawfully be refused in payment for goods and services and in discharge of debts.

2. Double-entry bookkeeping:Bookkeeper debits the transaction to one account and credits it to another bill of exchange: A non-interest-bearing written order used primarily in international trade that binds one party to pay a fixed sum of money to another party at a predetermined future date.

3. Arbitrage pricing theory:An equilibrium model of asset pricing that states that the expected return on a security is a linear function of the security’s sensitivity to various common factors.

4. Soft law:Quasi-legal instruments which do not have any legally binding force, or whose binding force is somewhat "weaker" than the binding force of traditional law, often contrasted to soft law by being referred to as "hard law".

5. Gold markets:According to its nature and the influence on the entire world gold transaction, gold market may be divided into leading market and regional market. According to the difference of transaction type and the transaction way, gold market may be divided into spot transaction and future transaction.

Following international experiences, gold market participants include; gold enterprises, banks, hedge funds, organizations and personal investors, broker companies and the exchanges.

Factors that Affect Gold Market are the quantity change of structure of supply and demand, economic factors and political situation and unexpected significant events.

There are many different ways to invest in gold, such as gold futures, gold exploration companies, blue-chip gold mining stocks, gold mutual funds, gold bars, gold bullion and gold coins.

Question3:

Answer:

Friedman held that money demand is relatively stable and money supply must be guaranteed stable, too, if there should be equilibrium between money demand and money supply. So Friedman opposed the management of the aggregate demand raised by Keynes and focused on the importance of money supply.

According to the Monetarist School, the core of economic policies is placed on monetary policy, which should be the only important wander-working among all economic policies. Without monetary policy, other economic policies can’t achieve their anticipated effect.

Friedman assumed that the best choice in controlling money supply was the "single rule" of monetary policy, i. e. , making it known to the public to adapt a fixed increasing rate of money supply, excluded other factors, such as interest rates, credit flow, excess reserves on a voluntary basis, and so on. So monetary policy should just take a certain money stock as the only decisive factor. In order to carry out the "single rule”, three problems should be solved; the first is how to define the scope of the aggregate money supply; the second is how to decide the increasing rate of money supply and the third is whether or not fluctuation of the increasing rate of money supply is allowed during a certain period, a year or a season. The solution to the above problems is as follows; firstly, M2 should be the scope of the aggregate money supply; secondly, the increasing rate of

money supply should be suited to economic growth rate and th irdly, it couldn’t be changed at will when the increasing rate of money supply had been decided. If there is need for change of the increasing rate of money supply, it should be announced and the band of fluctuation should be as small as possible.

Question4:

Answer:

The most widely used instrument of monetary policy is open market operations. Open market operations involve the purchase of securities by a central bank to put additional reserves at the disposal of the banking system or the sale of securities to reduce reserves so that money supply can be altered. Open market operations are the bread-and-butter instrument of Federal Reserve policy in U. S.

Because the central bank earns interest income from its securities portfolio, the total revenues earned by the central bank vary in direct proportion to the magnitude of its portfolio. However, this consideration plays no role in the central bank’s decision to acquire or sell securities. Indeed, if it did, the central bank could not perform the chief function of a central bank—conducting monetary policy in a way that contributes to the stability of aggregate expenditures and economic activity.

Suppose the U. S. economy is encountering excessive aggregate demand and escalating inflation. The central bank is therefore intent on implementing a policy of monetary restraint. In that event, the central bank would sell securities on the open market. Assume that the central bank sells $225 million in U. S. Treasury bills to a government securities dealer, receiving payment via a check written against the dealer’s bank checking account. When the central bank receives the check, it "collects" by debiting the reserve account of (making a bookkeeping entry against) the dealer’s commercial bank and returns the check to that bank. Upon receipt of the check, the commercial bank debits the dealer’s demand deposit account. The relevant balance sheets exhibit the following changes.

Question5:

Answer:

(1) A documentary credit is a written undertaking by a banker who is the agent fro the importer or the buyer. The function of a documentary collection is to provide both importer (buyer) and exporter (seller) with a compromise to settle their trade transactions between payment in advance and on open account terms.

The parties involved in a documentary credit arrangement include issuing banker, advising banker, the applicant and the beneficiary. Parties involved in a documentary collection include the drawer (exporter or seller), the remitting bank, the collecting bank and the drawee (importer or buyer). .

Their processes are different.

(2) In accordance with the instructions of the importer, the bank undertakes to pay the exporter, up to a limit, within a designated time period and against any stipulated terms and documents.

The credit created for international settlement among banks not only provides a sense of security for the traders involved , but also a reliable source of finance for foreign trade where required .

(3) A "revocable credit" may be cancelled at any time up to the moment the advising bank pays. This type of credit is the least favorable to the exporter.

An irrevocable credit may not be amended or even cancelled without the consent of all the parties involved. This type of credit guarantees payment to the beneficiary, provided that the credit terms and conditions are met.

Question6:

Answer:

(1) Since the late 1980s, the growing concerns about drug trafficking and the uses made of globalization facilitated by the advancements in communication technology have led to direct and indirect approaches by different international institutions and the international community to combat financial crime and money laundering.

(2) The FATF and affiliated regional organizations lead the international efforts in directly combating

money laundering. Members of the FATF engage in annual self-assessments and in periodic mutual evaluations of members’ anti-money laundering efforts. In June 2000, the FATF identified 15 non-member jurisdictions that it considers as "non-cooperative with international efforts against money laundering". Since the FATF is a voluntary task force and not a treaty organization, its recommendations do not constitute a binding international convention.

Fund staff has participated, as observers, in most FATF plenaries since 1980. At the request of the FATF, Fund staff made a statement at the Junel996 FATF Plenary on the macroeconomic impact of money laundering, and the Managing Director made a statement at the February 1998 FATF plenary. The FATF has recently agreed to share results from their exercises with Fund staff conducting financial assessments, in the context of FSAP and OFC assessments. At a recent IMF Executive Board meeting, the possibility was raised that the FATF could be invited to prepare ROSC modules on Fund members’ observance of the FATFs Forty Recommendations. Some members of the FATF have asked that the Fund’s Article IV"? Surveillance and program conditionally include anti-money laundering considerations. The FATF President, in a letter to Fund management, suggested that the FATF Forty Recommendations be adopted as the anti-money laundering standard.

(3) Other direct efforts to counter financial crime are undertaken mainly by the International Criminal Police Organization (Interpol) and national financial intelligence units (FIUs). The United Nations takes part in the direct efforts through the United Nation’s Office for Drug Control and Crime Prevention Global Program against Money Laundering (UNDCCP), which monitors weaknesses in global financial systems and assists countries in criminal investigations.

Recently, the international community’s awareness of financial system abuse has been heightened by the work of the FSF. In May 2000, the FSF classified 42 OFCs into three groupings, and called on the Fund to take the lead in assessing OFCs adherence to internationally accepted standards and codes.

(4) Indirect efforts to counter financial system abuse focus on the preconditions for the proper functioning of financial systems and the formulation and enforcement of relevant laws. These efforts encompass general standards for the supervision and regulation of banks, securities markets, and insurance, as incorporated in the standards developed by the Basel Committee, the IOSCO, and the IAIS. The substance of relevant FATF recommendations is incorporated in the principles of supervision of the Basel Committee and other international supervisory standard-setters.

(5) Banking, insurance, and securities markets supervisors are involved in both indirect and direct efforts to combat financial system abuse. Supervisors in different countries exchange information (often based on a network of memoranda of understandings) about individual banks, insurance companies, or agents in the securities markets, with a view to uncover unsound and illegal activities such as securities fraud, insider trading, or misreporting. Supervision is also exercised over the internal mechanisms to control risks, particularly operational risks, which also contributes to countering fraud and other forms of financial crime.

(6) Out of concern over the potential impact of tax-induced distortions in capital and financial flows on welfare and on individual countries tax bases, the OECD initiated coordinated action for the elimination of harmful tax practices. In May 1998, the OECD issued a report on Harmful Tax Competition including a series of 19 recommendations for combating harmful tax practices, established a Forum on Harmful Tax Practices, and proposed Guidelines for Dealing with Harmful Preferential Regimes in Member Countries (Annex II). In June 2000, OECD issued a list of countries it considers as engaged in harmful tax practices.