Q4. Karen Doyle and Amy Rodriguez are economists for a large U.S. investment advisory firm, Woodlawn Advisors. Doyle and

Rodriguez use their independent research on developed country stock markets and emerging stock markets to provide advice

for the firm’s network of advisors. As the senior economist at Woodlawn, Doyle is a partner in the firm and is Rodriguez’s

supervisor. Rodriguez has worked for Woodlawn for the past four years. At a lunch meeting, the two economists discuss the growth

prospects in BRIC (Brazil, Russia, India, and China) countries and compare them to the countries of the G6 (U.S., Japan, U.K., Germany, France, and Italy).

In their discussions, Doyle states that forecasted growth for the BRIC countries is quite impressive, especially in those countries with stable economic environments. She states that, by the year 2050, the per capita income in U.S. dollar terms in the majority of BRIC countries will exceed that in the G6 countries. Rodriguez is also very interested in BRIC country prospects, particularly in the factors necessary to sustain economic growth in the BRICs. She states that inflation need not hinder BRIC future growth, and that double-digit inflation may be necessary for BRICs to sustain future growth. Otherwise, she states, restrictive monetary policy can impede growth in an emerging economy.

Turning their attention next to currency valuation in the BRIC countries, Doyle states that currency values can be compared to that predicted by Purchasing Power Parity (PPP). For example, she states that if the current value of the Brazilian real is $0.53, then the value predicted by PPP should be higher, at say $0.60. Rodriguez states that, by the year 2050, the value predicted by PPP and the actual currency value should converge to a level higher than the current.

Doyle and Rodriguez then discuss the risks faced by investors in emerging markets. Doyle states that because many emerging countries have unstable political and social systems, the investor must carefully analyze the risk in these countries. She states that bond investors should examine the deficit to GDP ratio. Ratios greater than four percent indicate substantial credit risk of the country’s bonds. Rodriguez states that these small economies are often heavily dependent on the technology industry and their undiversified nature makes them susceptible to volatile capital flows and economic crises.

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Doyle and Rodriguez then provide the employees a discussion regarding the correct method of valuing a market. They use the following data for an aggregate stock market in order to estimate the return on a stock market using the earnings multiplier approach.

The next day, talking amongst themselves, Doyle and Rodriguez discuss the currency risk in more detail. Doyle states that, in developed country stock markets, the currency value and the stock value often fall together because, when investors lose confidence in the currency, they also typically lose confidence in the stock market. Rodriguez states that if an investor wishes to add a manager with expertise in currencies to his or her existing investment policy, then the investor would use a balanced mandate approach.

With respect to the statements regarding the per capita income and inflation in BRIC countries:

A)   Doyle is correct; Rodriguez is correct.

B)   Doyle is correct; Rodriguez is incorrect.

C)   Doyle is incorrect; Rodriguez is incorrect.

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[此贴子已经被作者于2009-1-13 16:52:01编辑过]

答案和详解如下：

Correct answer is C)

Doyle is incorrect. Although she is correct that forecasted growth for the BRIC countries is quite impressive especially when there are stable economic environments, she is incorrect in her statement regarding per capita income. By 2050, the per capita income in the majority of BRIC countries (except in Russia) is projected to be below that in G6 countries.

Rodriguez is incorrect. The ability to sustain growth in a country is influenced by its macroeconomic stability which is characterized by stable inflation, responsible fiscal policies, stable currency values, and accommodating governmental policies. High inflation hampers growth because it discourages investment in the economy by households and businesses. As such, governmental fiscal and monetary policies should focus on controlling inflation.