CFA Level I · CFA Level I Exam · International Trade
In a country's balance of payments, a purchase of foreign government bonds by a domestic investor is most likely recorded in the:
The purchase is recorded in the financial account as an outflow. Buying foreign bonds raises the country's holdings of foreign financial assets. The current account covers trade, income and transfers, and the capital account covers capital transfers, so neither records a securities purchase.
- Acurrent account as a debit
- Bfinancial account as an outflowCorrect
- Ccapital account as a transfer
Explanation
Purchases of foreign financial assets by residents are recorded in the financial account as an increase in foreign assets, which is a capital outflow. The current account covers goods, services, income and current transfers. The capital account covers capital transfers and non-produced, non-financial assets, not securities purchases.
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