- 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
Which of the following is true?
A. All central bank transactions are excluded from balance of payment accounts.
B. All cash flows associated with foreign investments belong to the capital account.
C. Repatriation of domestic currency to a foreign country by foreign nationals living in the country is treated as part of the current account.
Explanation: A is false. Official assets are included in the financial account. B is false. Such cash flows belong to the financial account. However, income associated with investment is treated as part of the current account. C is a direct outflow of domestic currency and is treated as a debit entry on the current account.
User Contributed Comments 3
| User | Comment |
|---|---|
| Staf | Assuming it is income |
| steved333 | Wouldn't that mean that cash outflows for foreign investments would come from the financial acct? Reread: it says ALL cashflows... so yeah, B's false. |
| octavianus | C is investment income made in the US for example on US T-Bonds by a British investor. The coupon payments are transfered from the US to the UK. Investment income is part of Current Account. |