thanks jpsi1. it’s settle things like this that will trip me up on the exam.
the more mistakes like this we make now the better chance we stand to avoid been tricked on real deal. Good luck with your review.
fyi as a retaker i remember the real exam being very tough, much like the sample exams. In fact, one was considerably easier than the other, much like the sample exams. also, i do see a major incentive to make the exam tougher rather than easier, so that they can look over the stats and adjust the curve after the fact. if it’s too easy and more than 50% of the candidates get over a 70%, CFA will jus have to live with it in any case, i myself have been averaging 78% on schweser exams, 75% on cfa mocks, but only 68% on the 2 samples. f.
another question on the sample version 2- Did the cfai solution have it backwards? they’re claiming that foreign direct investments increase your own countries’ capital account, but shouldn’t it decrease in your country and increase in the foreign country?
No, foreign direct investment increases the capital account of the country being invested in. If the US invests $50 abroad and foreign investors invest $200, then the US capital account balance would be $150 ($200-$50). See CFAI Vol. 1, p. 617.
i agree with you, but there was a question on the sample that states “…a country should encourage foreign direct investment as it is the best way to increase both the financial account and current account.” the solution was that she was most accurate with the the financial account. I would think it’s the other way around because we will be investing in another foreign country so our financial account would decrease will the other country’s will increase.
if foreigners are investing in your country, the cash IN-flow will be positive for the Financial (aka capital) account…making sense with Marlows quote from CFA as as well your first half of the post
theCFAway, note the word DIRECT. If an investment is made into a country via DIRECT investment, then it will hit the Financial Account. Alternatively, if an investment into a country is via a financial market then it will increase the Current Account.
thanks Dexta! too many settle words on the exam.