BMC CURRENCIES TEST PAPER 2026 STUDY
GUIDE REVIEW
◉ Based on the following Big Mac index screen shot, which of the
following currencies is considered the most overvalued and which is
the most undervalued? Answer: CHF is the most overvalued and ZAT
is the most undervalued
◉ Click the screen to read a news article and review the economics
tab on Bloomberg's FX Information Portal (FXIP <GO>). Based on
the data in the screens, what inference can you make? Choose the
best answer. Answer: The price of goods and services in most G10
countries were increasing, relative to their economic growth. As a
result, central banks in these countries were likely raising policy
rates.
◉ What monetary policy action could Turkey have taken to stabilize
or strengthen the value of the Turkish Lira? Answer: Raise interest
rates as this will help reduce inflationary pressures and support the
value of the Turkish Lira
◉ What is the best long-term approach to measuring a currency's
relative over or under valuation? Answer: A PPP model such as the
Big Mac Index
, ◉ Which of the following surprises would most likely decrease the
valuation of a currency? Answer: Surprise decrease in central bank
rates
◉ Review the charts below to calculate the price of the Swiss franc
in terms of the Japanese Yen. Answer: 142.75
◉ Based on the table displaying expected and announced interest
rate changes, which country's currency is likely to experience the
most significant increase in response to the news? Answer: B
◉ Based on the trade flow screen, which statement most accurately
reflects the United States trade flow relationship with Mexico and
Canada? Answer: In 2022, the United States had significantly greater
imports than exports from both Mexico and Canada. Therefore,
Mexico and Canada are both net exporters to the United States and
have a net trade surplus with the United States.
◉ Why would a government typically want to weaken its currency?
Answer: To increase the cost of imports and protect domestic
industries
◉ In which scenario is a verbal intervention by a central bank likely
to be successful in influencing the exchange rate? Answer: when the
central bank has a credible reputation for its policy actions, and
market participants trust its statements
GUIDE REVIEW
◉ Based on the following Big Mac index screen shot, which of the
following currencies is considered the most overvalued and which is
the most undervalued? Answer: CHF is the most overvalued and ZAT
is the most undervalued
◉ Click the screen to read a news article and review the economics
tab on Bloomberg's FX Information Portal (FXIP <GO>). Based on
the data in the screens, what inference can you make? Choose the
best answer. Answer: The price of goods and services in most G10
countries were increasing, relative to their economic growth. As a
result, central banks in these countries were likely raising policy
rates.
◉ What monetary policy action could Turkey have taken to stabilize
or strengthen the value of the Turkish Lira? Answer: Raise interest
rates as this will help reduce inflationary pressures and support the
value of the Turkish Lira
◉ What is the best long-term approach to measuring a currency's
relative over or under valuation? Answer: A PPP model such as the
Big Mac Index
, ◉ Which of the following surprises would most likely decrease the
valuation of a currency? Answer: Surprise decrease in central bank
rates
◉ Review the charts below to calculate the price of the Swiss franc
in terms of the Japanese Yen. Answer: 142.75
◉ Based on the table displaying expected and announced interest
rate changes, which country's currency is likely to experience the
most significant increase in response to the news? Answer: B
◉ Based on the trade flow screen, which statement most accurately
reflects the United States trade flow relationship with Mexico and
Canada? Answer: In 2022, the United States had significantly greater
imports than exports from both Mexico and Canada. Therefore,
Mexico and Canada are both net exporters to the United States and
have a net trade surplus with the United States.
◉ Why would a government typically want to weaken its currency?
Answer: To increase the cost of imports and protect domestic
industries
◉ In which scenario is a verbal intervention by a central bank likely
to be successful in influencing the exchange rate? Answer: when the
central bank has a credible reputation for its policy actions, and
market participants trust its statements
