CFA Level I · CFA Level I Exam · Capital Flows and the FX Market
In a country's balance of payments, a purchase of foreign government bonds by a domestic resident is most likely recorded in the:
The purchase of foreign bonds is recorded in the financial account, because that account captures cross-border transactions in financial assets and liabilities. The current account covers trade, income and transfers, and the capital account covers capital transfers and non-produced non-financial assets.
- Acapital account
- Bfinancial accountCorrect
- Ccurrent account
Explanation
Transactions in financial assets such as foreign bonds, equities and direct investment are recorded in the financial account. The current account covers trade in goods and services, income and current transfers. The capital account covers capital transfers and non-produced, non-financial assets.
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