BA1 Questions Explanations - Cima Latest Fundamentals Of Business Economics Test Guide - Omgzlook

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BA1 PDF DEMO:

QUESTION NO: 1
Vencia has recently been faced with international condemnation due to its tendency to engage in 'dirty floating'. This is combined with high interest rates as well as underdeveloped industries.
What would likely be the result of these conditions on Vencia's trade?
A. Other countries responding to Vencia's 'dirty floating' in a protectionist manner
B. Some investment in the short-term due to high interest rates
C. The Bank of Vencia buying treasury bonds to loosen its monetary policy
D. The government of Vencia increasing its VAT and basic rate of income tax further
E. A lack of investment from businesses in the long-term
Answer: B,E

QUESTION NO: 2
Beth wants to take out an annuity in order to be able to leave more money to her children when she passes away. She has looked at three annuities with different payout rates.
Annuity A pays out £5340 each year over 14 years
Annuity B pays out £4900 each year over 9 years
Annuity C pays out £5445.64 each year over 20 years
The current interest rate is 8%.
Of these, which annuity would have the highest net present value and hence pay out more money for Beth over its lifetime?
A. £53,460.10
B. £30,609.75
C. £60,455.63
D. £44,024.23
Answer: A

QUESTION NO: 3
Which of the following describes a 'spot rate' in foreign currency dealing?
A. It is a short term rate that may change in the immediate future
B. It is the exchange rate minus the inflation rate
C. It is the price for a currency that is to be delivered immediately
D. It is the exchange rate minus any commissions or transactions charges
Answer: C

QUESTION NO: 4
Which of the following best describes the term 'National Debt'?
A. Money the government owes to governments of other countries
B. The accumulated borrowings by the government in previous years that have not yet been repaid
C. Money the government must borrow to make up the shortfall between tax revenue and government expenditures
D. Special assets issued by government to finance wars
Answer: B

QUESTION NO: 5
Conflict between the objectives of shareholders and those of management in a company may anse because
A. managers are concerned with the level of profits but shareholders are only interested in the long term share price
B. raising the pay of management may be incompatible with increasing shareholder value.
C. managers are more concerned with day to day management than shareholders
D. shareholders are always interested in the short term but those in management are interested in the long term
Answer: C

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Updated: May 28, 2022