BMC 2025/2026 QUESTIONS AND SOLUTIONS MARKED A+
✔✔A drop in which of the following measures would typically send a government bond
price down? - ✔✔Creditworthiness
✔✔Which of the countries shown makes the greatest relative use of long-term
government financing? - ✔✔United Kingdom
✔✔An investor is comparing two bonds of similar structure from the same issuer. Which
bond should the investor buy? - ✔✔The bond with the highest yield if the two bonds
have the same maturity date.
✔✔Which of the following has the biggest impact on consumer goods during war times?
a. Consumers deferring purchases in hopes of a better deal
b. High interest rates
c. Low inflation
d. High inflation - ✔✔d. high inflation
✔✔Investors who fear rising inflation may buy Treasury Inflation Protected Securities
(TIPS). How do TIPS shield lenders from inflation? - ✔✔By compensating investors for
inflation
✔✔What is the Federal Reserve's favorite inflation gauge? - ✔✔Core PCE
✔✔Why does the yield curve naturally slope upwards? - ✔✔To compensate lenders for
the greater risk of long-term loans compared to short-term loans
✔✔What does it mean when a company's corporate spread tightens? - ✔✔The
company's bonds are outperforming the benchmark yield.
✔✔What are the three main transmission mechanisms by which the yield curve affects
the economy? - ✔✔Corporate impact, global impact, consumer impact
✔✔The purchase of which of the following products is most affected by interest rates? -
✔✔Apartment
✔✔What is the primary driver of the left-hand end of the yield curve? - ✔✔Central bank
interest rates
✔✔Why do companies do IPOs - ✔✔IPOs incentivize entrepreneurs to innovate as
IPOs provide a way for entrepreneurs to monetize their work.
✔✔In 1999, James Glass-man 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? - ✔✔"The Sum of the
Share Prices of All 30 Dow Jones Members Will Triple"
✔✔What is the prime reason that Jenny's discretionary income is more volatile than her
salary? - ✔✔Her mortgage payments and necessities are fixed.
✔✔A luxury cell phone maker has a high fixed-cost base and a lot of debt. Which
stakeholder in the company would you rather be? - ✔✔A shareholder in a booming
economy.
✔✔Why are equities volatile? - ✔✔Due to the residual nature of earnings
✔✔Which of the following statements is true? - ✔✔When you buy an equity, the most
you can lose is 100% and your potential gain is unlimited.
✔✔Company A pays a dividend of 2%. Company B's stock price increases 1% plus the
inflation rate every year. Company C pays 3% dividends, and its stock price decreases
every year by 2%. Company D pays 0% dividends, an its stock price does not increase
year over year. If the companies are otherwise identical, which would you invest in? -
✔✔Company B
✔✔What does the release of earnings announcements have in common with the
release of economic indicators? - ✔✔Both are scheduled in advance
✔✔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 analyst research note to help a portfolio manager decide between investing
in Rolls-Royce or Unite Technologies? - ✔✔A comparison of the commercial prospects
of new aircraft models
✔✔You are an analyst for a home-building company tasked with creating a financial
model of home-building trends. Which of the following factors should your model
address? - ✔✔The price of wood products and long-term interest rates.
✔✔When an analyst is looking at a company for the first time, which of the following
four activities does he do first? - ✔✔Defines the industry or industries in which the
company operates.
✔✔Company X was expected to have earnings per share of $0.52 for the upcoming
quarter. On the day of the results, the company reported earning per share of $0.83.
What happened to the share price when the stock market opened? - ✔✔There is not
enough information to tell.
✔✔A drop in which of the following measures would typically send a government bond
price down? - ✔✔Creditworthiness
✔✔Which of the countries shown makes the greatest relative use of long-term
government financing? - ✔✔United Kingdom
✔✔An investor is comparing two bonds of similar structure from the same issuer. Which
bond should the investor buy? - ✔✔The bond with the highest yield if the two bonds
have the same maturity date.
✔✔Which of the following has the biggest impact on consumer goods during war times?
a. Consumers deferring purchases in hopes of a better deal
b. High interest rates
c. Low inflation
d. High inflation - ✔✔d. high inflation
✔✔Investors who fear rising inflation may buy Treasury Inflation Protected Securities
(TIPS). How do TIPS shield lenders from inflation? - ✔✔By compensating investors for
inflation
✔✔What is the Federal Reserve's favorite inflation gauge? - ✔✔Core PCE
✔✔Why does the yield curve naturally slope upwards? - ✔✔To compensate lenders for
the greater risk of long-term loans compared to short-term loans
✔✔What does it mean when a company's corporate spread tightens? - ✔✔The
company's bonds are outperforming the benchmark yield.
✔✔What are the three main transmission mechanisms by which the yield curve affects
the economy? - ✔✔Corporate impact, global impact, consumer impact
✔✔The purchase of which of the following products is most affected by interest rates? -
✔✔Apartment
✔✔What is the primary driver of the left-hand end of the yield curve? - ✔✔Central bank
interest rates
✔✔Why do companies do IPOs - ✔✔IPOs incentivize entrepreneurs to innovate as
IPOs provide a way for entrepreneurs to monetize their work.
✔✔In 1999, James Glass-man 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? - ✔✔"The Sum of the
Share Prices of All 30 Dow Jones Members Will Triple"
✔✔What is the prime reason that Jenny's discretionary income is more volatile than her
salary? - ✔✔Her mortgage payments and necessities are fixed.
✔✔A luxury cell phone maker has a high fixed-cost base and a lot of debt. Which
stakeholder in the company would you rather be? - ✔✔A shareholder in a booming
economy.
✔✔Why are equities volatile? - ✔✔Due to the residual nature of earnings
✔✔Which of the following statements is true? - ✔✔When you buy an equity, the most
you can lose is 100% and your potential gain is unlimited.
✔✔Company A pays a dividend of 2%. Company B's stock price increases 1% plus the
inflation rate every year. Company C pays 3% dividends, and its stock price decreases
every year by 2%. Company D pays 0% dividends, an its stock price does not increase
year over year. If the companies are otherwise identical, which would you invest in? -
✔✔Company B
✔✔What does the release of earnings announcements have in common with the
release of economic indicators? - ✔✔Both are scheduled in advance
✔✔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 analyst research note to help a portfolio manager decide between investing
in Rolls-Royce or Unite Technologies? - ✔✔A comparison of the commercial prospects
of new aircraft models
✔✔You are an analyst for a home-building company tasked with creating a financial
model of home-building trends. Which of the following factors should your model
address? - ✔✔The price of wood products and long-term interest rates.
✔✔When an analyst is looking at a company for the first time, which of the following
four activities does he do first? - ✔✔Defines the industry or industries in which the
company operates.
✔✔Company X was expected to have earnings per share of $0.52 for the upcoming
quarter. On the day of the results, the company reported earning per share of $0.83.
What happened to the share price when the stock market opened? - ✔✔There is not
enough information to tell.
