CIMA Applied Finance & Economics

Question 1

What does the time value of money principle imply?

Accepted Answer

A dollar today has more value than a dollar tomorrow

Answer

Future money is more valuable than present money

Answer

Money's value stays constant over time

Answer

Money loses value only during inflation

Question 2

Which economic indicator is used to gauge inflation?

Accepted Answer

Consumer Price Index (CPI)

Answer

GDP

Answer

Unemployment Rate

Answer

Interest Rate

Question 3

What does beta measure in finance?

Accepted Answer

Systematic risk relative to the market

Answer

Company’s earnings growth

Answer

Risk-free rate

Answer

Volatility of the overall economy

Question 4

What is the Federal Reserve’s primary tool for controlling inflation?

Accepted Answer

Altering the federal funds rate

Answer

Changing the reserve requirement

Answer

Buying stocks in open market

Answer

Changing tax policy

Question 5

Which of the following represents the real interest rate?

Accepted Answer

Nominal rate - inflation

Answer

Nominal rate + inflation

Answer

Nominal rate / inflation

Answer

Inflation - nominal rate

Question 6

Which theory suggests that markets reflect all available information?

Accepted Answer

Efficient Market Hypothesis

Answer

Keynesian Theory

Answer

Monetarist Theory

Answer

Behavioral Finance