Question 1

Every year a household allows its bank account to become overdrawn for 3 months to pay for its annual holiday. Which one of the following statements correctly describes this?

Options :

A : A short term lack of synchronization between payments and receipts

B : Long term borrowing

C : Medium term borrowing

D : Maturity transformation

Answer: C

Question 2

Which of the following influences explains why the average costs of a firm will rise in the short run?

Options :

A : Diseconomies of scale

B : Rising unit costs

C : Diminishing marginal returns

D : Diminishing returns to scale

Answer: C

Question 3

Company A is looking to protect itself from transaction exchange rate risk.

Company A does not require 100% of the value of transaction to be protected, and it would like the method it uses to have the following characteristics

* An agreed exchange rate for a specified period where both parties have a legal obligation

* A separation of the contract guaranteeing the pnce of the currency from the underlying transaction.

Which of the following would best provide the type of protection from exchange rate risk company A wants?

Options :

A : Future

B : Option

C : Forward contract

D : Floating exchange rate

Answer: C

Question 4

Organisations are able to achieve more than individuals can achieve because they allow people to do which THREE of the following?

Options :

A : To devolve decision-making

B : To pool resources

C : To share skills and knowledge

D : To specialise

E : To earn profits

F : To create hierarchies

Answer: A,C

Question 5

The business sector will be affected by a contraction in the money supply because

Options :

A : Interest rates will tend to fall, thus reducing business costs.

B : Inflation will fall and thus demand in the economy will expand.

C : Consumer credit will contract thus reducing consumer demand.

D : The exchange rate will fall thus making business more internationally competitive.

Answer: C

Free CIMAPRA17-BA1-1-ENG Mock Exam – Practice Online Confidently

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