- CFA Exams
- CFA Level I Exam
- Topic 2. Economics
- Learning Module 14. International Trade and Capital Flows
- Subject 4. The Balance of Payments
CFA Practice Question
Stock dividends from foreign investment should be recorded as a ______ on the ______ account while interest payments from foreign government bonds should be recorded as a ______ on the ______ account.
Correct Answer: They should both be recorded as credit on the current account.
User Contributed Comments 9
| User | Comment |
|---|---|
| SKIA | Why are these on the current account? The reading states, "the financial account documents all international monetary flows related to investment in financial assets such as bonds and stocks." |
| Shaan23 | Interest and dividend payments are current account No idea how somebody can ask this question after doing the first 9 question. |
| schweitzdm | I fell for the same trick, SKIA. My first attempt was: Credit on financial (assumed an inflow from a stock) Debit on financial (assumed outflow from a bond) Now I realize that if you are receiving an interest payment from a bond, it would be an inflow. Furthermore, it seems that these are on the current account because they are not the initial principal payment going towards a stock or a bond. |
| schweitzdm | Happy to say that on my 2nd exposure to this question I got it right. Woohoo. |
| ankurwa10 | Shaan23; don't know whether yours comments helps "lesser lights" like me because it clearly does not help in where i went wrong. Had to cross check the schweser reading; where it mentions that income of debt securities and income receipts are reflected in the current account. |
| xp_acctant | Tricky question, fell for "WHILE" , thinking obviously there is a difference. |
| babycdq | They are all income from investment. should be recorded in current account. |
| khalifa92 | the U.S GAAP treatment for interest and dividends *received* is operational. |
| Freddie33 | Shaan don't be a d1ck |