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NEW QUESTION: 1
Janice Palmer, CFA, is an international equity analyst at a large investment management firm catering to high net worth U.S. investors. She is assisted by Morgan Greene and Cathy Wong. Both Greene and Wong have prepared their preliminary security selections and are meeting along with Palmer today for detailed security analysis and valuation. They have narrowed their focus to a few closed-end country funds and some firms from Switzerland, Germany, the U.K. and the emerging markets.
The initial decision is to choose between closed-end country funds and direct investment in foreign stock markets. Wong is in favor of country funds because:
1. Country funds provide immediate diversification.
2. Buying country funds is a better choice than direct investment for most emerging markets.
However, Wong has observed a premium to NAV that is prevalent in closed-end country funds. Wong is curious as to how the observed premiums would affect investments in such instruments.
In contrast to Wong, Greene is more inclined towards individual stocks and has started looking into their financial statements. One firm Greene is analyzing is a German conglomerate. Kaiser Corp. Kaiser has a history of growing by acquiring high-growth firms in niche markets. Exhibit 1 provides key financial information from Greene's analysis of Kaiser Corp.
Exhibit 1: Financial information-Kaiser Corp.
While going through their sample of emerging market stocks, Wong observed that these markets in general have high inflation and that sales for the stocks were extremely seasonal. Wong compensated by adjusting reported sales growth in the emerging market firms by deflating the sales using annual inflation adjustments. Wong also made upward adjustments to reported depreciation figures.
Wong suggested to her colleagues that they add a country risk premium to the discount rate they were using to evaluate emerging market stocks. She further suggested that they estimate country risk premiums by calculating the spread between the yield of U.S. government bonds and that of similar maturity local bonds.
Subsequently they started working on the financial projections for Emerjico, Inc., an emerging market stock. Their assumptions are given in Exhibit 2.
Exhibit 2: Key Assumptions-Emerjico
Wong made two adjustments to the financial statements of the emerging market stocks. Which of the adjustments are correct?
A. Only the inflation adjustment is correct.
B. Both the inflation and depreciation adjustments are correct.
C. Only the depreciation adjustment is correct.
Answer: C
Explanation:
Explanation/Reference:
Explanation:
Wong is correct about her observation that growth is overstated in an inflationary economy. However, sales, being highly seasonal, need to be deflated using monthly or quarterly inflation and not annual inflation. Her inflation adjustment is therefore not appropriate. Her upwards adjustment to reported depreciation is appropriate, as depreciation charges based on historical costs are probably not reflective of current replacement costs in an inflationary environment. (Study Session 11, LOS 39.a,c)
NEW QUESTION: 2
An application using the WebSphere MQ classes for JMS encountered an error. A First Failure Support Technology (FFST) file has been created named JMS0001.FDC.
Which default directory should the system administrator review?
A. /var/mqm/errors/FFDC
B. /var/mqm/qmgrs/QMGRNAME/errors/FFDC
C. /var/mqm/errors
D. current application working directory/FFDC
Answer: A
NEW QUESTION: 3
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B. Distributes policies that govern data forwarding
C. Establishes IPsec tunnels with nodes.
D. Establishes BFD sessions to test liveliness of links and nodes
Answer: B
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