Economics > STUDY GUIDE > MB 101_Bloomberg Answers 2020 - Economic Indicators | MB101_Bloomberg Answers - Economic Indicators/ (All)
Bloomberg Answers Economic Indicators The Primacy of GDP (30 min.) Knowledge Check 1 How accurately do GDP statistics portray the economy and why? Inaccurately because the scope of GDP measurement... s can change. Knowledge Check 2 Consider the formula GDP = C I (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? Knowledge Check 3 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. Knowledge Check 4 In the US, why is there a strong correlation between unemployment and GDP? unemployed consumers rises, there is less consumer spending. SECTION QUIZ 1.1. 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? a. The country has deflation. The bottom line is nominal growth and the top line is real growth. 2.2. Which of the following lines is the best leading economic factor? a. PMI 3.3. The “misery index” is often cited in the media as a way to measure consumer pain. It is defined as the inflation rate plus the unemployment rate. Review and identify the country with the highest “misery index.” a. Argentina 4.4. What typically happens to nonfarm payrolls, the PMI indicator, and housing starts at the onset of a recession in the United States? - - -- - - - - - - - - - - - - - 2. What is the main reason that investment banks create estimates of economic indicators? a. To know when specific economic data points are a positive or negative surprise. 3. Which of the following is the biggest pitfall of economic indicators? a. They do not consistently presage turning points. 4. Here is a chart displaying estimates of the initial jobless claims indicator, one of the main unemployment statistics in the U.S. It measures the number of new applicants for unemployment benefits. What was the level of the analyst with the most optimistic outlook? a. 260Currencies Currency Market Mechanics (25 min.) Knowledge Check 1 Which country is both the fourth biggest importer and exporter? Knowledge Check 2 In 1994, the Mexican peso declined against the U.S. dollar during the so-called “Tequila Crisis”. What exacerbating factor did Mexico’s “Tequila Crisis” have in common with the Argentine crisis of 2002? Knowledge Check 3 Using the given chart, how many New Zealand dollars (NZD) can you buy with 100 Australian dollars (AUD)? - - - - - - - - - - - - - - - - - - - - - - SECTION QUIZ 1. Allison lives in America and has just retired. It is early 2016. She has long had dreams of cruising the fjords on the west coast of Norway, visiting Buckingham Palace in the United Kingdom, seeing the cherry blossoms in Japan, and going to the top of the Eiffel Tower in France. She last considered all four options on New Year’s Day 2008. She would like to select the trip to go on based on which country’s currency has subsequently weakened the most against the U.S. dollar. Where should she go on vacation? a. NORWAY 2. Review the currency pair charts for the Barbadian dollar against the Jamaican dollar, the Czech koruna against the Polish zloty, the Nigerian naira against the Ghanaian cedi, and the Hong Kong dollar against the Macanese pataca. Which pair is pegged. a. The Hong Kong dollar against the Macanese pataca 3. Which of the following is NOT an example of a failed peg? a. Hong Kong dollar against the U.S. dollar in 1997. 4. Use the chart below to answer the question. How many Danish crowns (DKK) will buy 100 Japanese yet (JPY)? a. 5.360 Currency Valuation (20 min.) Knowledge Check 1 According to this Big Mac index screen, which of the following four countries’ currency is the most undervalued? What generally happens when a central bank unexpectedly increases interest rates? Knowledge Check 3 Which driver weakened the Swiss franc? SECTION QUIZ 1. What does the Big Mac index show? a. How currencies may be overvalued or undervalued 2. Which of the following are short-term drivers of currency valuation? a. Surprise changes in interest rates, inflation, and trade 3. By what mechanism do interest rates affect currency values? a. Global investors are attracted by higher bond yields in high interest rate countries 4. Which of these headlines could move a currency pair? a. U.S. Stocks Rally on Fed’s Surprise Reduction of the Interest Rate Central Banks and Currencies (15 min.) SECTION QUIZ 1. What is the most common target inflation rate for an advanced economy? a. 2% 2. What was the primary goal of Abenomics? a. To halt the vicious cycle of deflation 3. Here is the deflationary cycle. What steps connect the lower left gray arrow to the upper right blue arrow? a. Prices Decline 4. Were the two oil crises in the 1970s linked to deflation or inflation? - - - - - - - - - - - - - - - Why is fixed income called fixed income? SECTION QUIZ 1. Why does the United States have a strong reputation for creditworthiness? a. Because it has the right to tax the wealthiest population on earth. 2. What is one reason why foreign governments lend to the U.S. government? a. To build liquid FX reserves. 3. What does one yellow bar depict in this debt distribution diagram? a. Coupon repayment 4. Which one of the following actors benefits when interest rates go up? a. An investor who is about to buy bonds. Bond Valuation (50 min.) Knowledge Check 1 When investors doubt the creditworthiness of a borrower, how do they alter their calculation of the bond yield to take into account these doubts? Knowledge Check 2 As a general rule, what percentage of debt to GDP will make a government bond yield spike? Knowledge Check 3 What is true of both the UK and the US? Knowledge Check 4 Which would you prefer? country of UtopiaKnowledge Check 5 Which would you prefer? SECTION QUIZ 1. What is the primary reason for U.S. government bond yield to ripple through the bond market? a. The large government bond market competes for investors’ attention via yields. 2. A rise in which of the following measures would typically send a government bond price up? a. Creditworthiness. 3. Which of the countries shown makes the greatest relative use of short-term government financing? a. Norway. 4. How do investors compare bonds? a. By comparing the yields of single bonds. Central Bankers and Interest Rates (25 min.) Knowledge Check 1 Which of the following is the strongest driver of inflation? - - - - - - - - - - - - - - - - - - - - 1. Why do company manager-owners smile when they ring the stock exchange bell at their IPO? a. An IPO crystallizes the value of the manager-owners’ stake 2. The Dow Jones Industrial Average Index has an unusual weighting methodology. Unlike the S & P 500, it is weighted by share price. Here are 22 of the 30 members of the Dow Jones as of mid-June 2015. If all the shares went up by 5%, which share on the screen shown would have the biggest contribution to an upward movement in the index? a. Goldman Sachs 3. In 1999, James Glassman and Kevin Hassett published a book called “Dow 36,000.” At the time, the Dow Jones Industrial Average Index was just under 12,000. Which of the following is a potential substitute for the book title? a. “The Sum of the Share Prices of All 30 Dow Jones Members Will Triple.” 4. Here is a chart of the index value for the S&P 500 and the United Kingdom’s main equity index, the FTSE 100, from the end of 2008 to early 2015. The labels have been removed. One index has clearly outperformed the other. Over this period, there was a technology boom and an oil crash. Here are pie charts showing the early 2015 index compositions by industry for both the S&P 500 and the FTSE 100. Which index outperformed? a. The S&P 500 Index. The Nature of Equities (35 min.) Knowledge Check 1 What is the prime reason that Jenny’s discretionary income is more volatile than her salary? Knowledge Check 2 A wedding planning company has a high fixed-cost base and a lot of debt. Who would you rather be? Knowledge Check 3 The S&P 500 stood at 1848 at the end of 2013. According to the chart, what would the approximate return be on the S&P 500 from the trough of March of 2009 to the end of 2013, ignoring dividends? Assume that an investor in the S&P 500 reinvests his dividends. According to the chart, what approximate return would this investor have reaped from the early 2009 through to the endpoint of the chart? SECTION QUIZ 1. Why are equities volatile? a. Due to the residual nature of earnings. 2. Which of the following statements is true? a. When you buy an equity, the most you can lose is 100% and your potential gain is unlimited. 3. In the example highlighting the differences between bond holders and shareholders, we equated surgeon Jenny to a shareholder. Which row of the budget planning table shows the amount to which she as a shareholder would be entitled? a. D. 4. You but the stock of four consumer goods companies at the end of 2004 and hold them until August 2010. Here are the TRA (Total Return) charts from Bloomberg for all four stocks. The “Buy Price” in the top left-hand corner is the price you paid for each stock. The price of the stock in August 2010 is noted in the chart’s legend. The legend also states the Dividend Adjusted Value in 2010, which is the value of the stock including reinvested dividends over the holding period. For which stock did the bulk of the total return come from dividends? a. Procter & Gamble. Equity Research (45 min.) Knowledge Check 1 What does the release of earning announcements have in common with the release of economic indicators? Both are estimated in advance by analysts. Knowledge Check 2 The number at the bottom right of each supplier’s box shows the portion of Boeing’s costs in the last year that went to that supplier. The number at the bottom right of each customer’s box shows the portion of the customer’s capital expenditure (money spent in high value purchases) in the last year that went to Boeing. For which company shown was Boeing the primary plan supplier in the last year? Knowledge Check 3 Which company is most exposed to the ups and downs of the aircraft engine industry? Knowledge Check 4 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 analystresearch note to help a portfolio manager decide between investing in Rolls-Royce or United Technologies? Knowledge Check 5 You are building a financial model of a bifocal lens manufacturer. Which of the following is the best driver to use? - - - - - - - - - - - - - -- 1. Here is a chart of the NASDAQ Composite, the world’s main technology index. It peaked in the dotcom bubble on March 10, 2000. The P/E ratio later peaked above 500. In hindsight, this is widely agreed to have been a bubble. In March 2015, the index value for the first time since then surpassed the peak. Why might some investors at that point have argued “this time it’s different”? a. Earnings grew substantially, meaning that the P/E ratio in early 2015 was only around 30.3x. 2. The World Equity Index function shown contains two valuation metrics for the S&P 500. The Nike description contains the same two valuation metrics. How does Nike’s valuation compare to that of the S&P 500? a. Nike is more expensive than the S&P 500 on both a P/E and dividend yield basis. 3. If the earnings per share of a company is $1 and the earnings yield is 2%, what is the price per share? a. $50.00 4. This chart shows a scatterplot with the x-axis being the estimated sales growth and the y-axis being the estimated P/E multiple. Given this data alone, which of the following companies may warrant further analysis by a portfolio manager looking to buy an insurance company for her portfolio? a. Chubb. [Show More]
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