BMC (BLOOMBERG) COMPREHENSIVE TEST
PAPER 2026 COMPLETE QUESTIONS AND
ANSWERS EXPERT VERIFIED GRADED A+
◉ main currency drivers. Answer: 1) surprise changes in interest
rates
^^ rise in interest rates in one country will cause that country's
currency to strengthen relative to another
2) surprise changes in inflation
^^ money supply of one country expands rapidly compared to
another country... exchange rate of first country will depreciate
against the second country
3) surprise changes in trade
^^ when exporting, foreign buyer needs to buy home currency of the
exporter
(x-m) = positive = demand for home currency
^^ when importing, need to sell home currency in order to buy
currency of foreign seller
(x-m) = negative = diminished demand for home currency
◉ target inflation rate. Answer: 2% for developed economy
^^ protects purchasing power
^^ keeps borrowing costs low
,◉ inflation is psychological. Answer: once price raising expectations
are engrained, they're hard to unseat
workers expect price increases = workers demand pay increases =
company wages go up = companies raise prices
break cycle = interest rate hikes = sucks money out of system by
making saving money relatively more attractive
◉ deflation is psychological. Answer: prices decline = consumers
defer purchases to await lower prices = companies' revenues decline
= companies lay off workers to cut costs
break cycle = print money to buy gov bonds to raise inflation
◉ currency inverse relationship. Answer: weaker currency = that
country's exports are cheaper = exports are attractive to foreigners =
that country's companies get higher earnings
◉ gold. Answer: traditionally a safe haven asset that people turn to
in times of chaos
^^ durable perception of value through history
^^ not able to be manipulated by any gov (inflation hedge)
, ^^ non-yielding asset bc pays no dividends or interest
◉ fixed income. Answer: the bond market
^^ setting price of borrowing/lending to govs, businesses, and
investors
^^ bond = IOU that promises to make regular fixed amount
payments (coupons) + large payment @ end of loan (principal) +
interest as compensation for lending
^^ biggest market in the world, bigger than world GDP and world
stock markets
◉ yield. Answer: "equivalent of interest rate on a bank account"
^^ difference: the rates on offer to new buyers of the bond will move
as the price of the bond moves
yields make bonds comparable
inverse relationship between price and yield
elevated bond yields may force govs to enact budget cuts or tax hikes
◉ perpetual bond. Answer: bond in which principal is never repaid
^^ price and yield are perfect mirror image
PAPER 2026 COMPLETE QUESTIONS AND
ANSWERS EXPERT VERIFIED GRADED A+
◉ main currency drivers. Answer: 1) surprise changes in interest
rates
^^ rise in interest rates in one country will cause that country's
currency to strengthen relative to another
2) surprise changes in inflation
^^ money supply of one country expands rapidly compared to
another country... exchange rate of first country will depreciate
against the second country
3) surprise changes in trade
^^ when exporting, foreign buyer needs to buy home currency of the
exporter
(x-m) = positive = demand for home currency
^^ when importing, need to sell home currency in order to buy
currency of foreign seller
(x-m) = negative = diminished demand for home currency
◉ target inflation rate. Answer: 2% for developed economy
^^ protects purchasing power
^^ keeps borrowing costs low
,◉ inflation is psychological. Answer: once price raising expectations
are engrained, they're hard to unseat
workers expect price increases = workers demand pay increases =
company wages go up = companies raise prices
break cycle = interest rate hikes = sucks money out of system by
making saving money relatively more attractive
◉ deflation is psychological. Answer: prices decline = consumers
defer purchases to await lower prices = companies' revenues decline
= companies lay off workers to cut costs
break cycle = print money to buy gov bonds to raise inflation
◉ currency inverse relationship. Answer: weaker currency = that
country's exports are cheaper = exports are attractive to foreigners =
that country's companies get higher earnings
◉ gold. Answer: traditionally a safe haven asset that people turn to
in times of chaos
^^ durable perception of value through history
^^ not able to be manipulated by any gov (inflation hedge)
, ^^ non-yielding asset bc pays no dividends or interest
◉ fixed income. Answer: the bond market
^^ setting price of borrowing/lending to govs, businesses, and
investors
^^ bond = IOU that promises to make regular fixed amount
payments (coupons) + large payment @ end of loan (principal) +
interest as compensation for lending
^^ biggest market in the world, bigger than world GDP and world
stock markets
◉ yield. Answer: "equivalent of interest rate on a bank account"
^^ difference: the rates on offer to new buyers of the bond will move
as the price of the bond moves
yields make bonds comparable
inverse relationship between price and yield
elevated bond yields may force govs to enact budget cuts or tax hikes
◉ perpetual bond. Answer: bond in which principal is never repaid
^^ price and yield are perfect mirror image
