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Finance > CAPM, International Finance > Flashcards

CAPM, International Finance Flashcards

1
Q

CAPM =

A

Capital Asset Pricing Model

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2
Q

A Master Budget consist of a

A

Sales Budget
Production Budget
Purchase Budget
Cash Budget (Cash Payment + Cash Receipt_

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3
Q

How does the US Government finance it’s budget deficit?

A

Selling government securities (T Notes, Bills, and Bonds)

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4
Q

What is the current US budget deficit

A

$1.5 trillion (at least as far as Noorian cares)

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5
Q

How often does the US govt borrow / pay back money?

A

Weekly basis

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6
Q

What is the risk of a treasury bill?

A

ZERO

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7
Q

What values are government securities issued for?

A

Minimum $1000, and in multiples of $1000

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8
Q

What are the maturity options of Treasury Bills

A

3 months, 6 months, 1 year

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9
Q

What government securities pay interest up front

A

3 and 6 month treasury bills

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10
Q

For government securities with maturities of >= 1 year, how often does interest pay

A

semi-annually

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11
Q

What is the difference between treasury notes and treasury bonds?

A

the maturity

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12
Q

What range of maturity are treasury notes issued?

A

2-10 years

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13
Q

What range of maturity are treasury bonds issued?

A

10, 20, and 30 years

most popular - 30 year

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14
Q

How is interested determined for a treasury bill?

A

Auction format

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15
Q

Bids for treasury bills are either ____ or ____

A

competitive or non-competitive

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16
Q

To what level of detail is interest bid for T-bills

A

4 significant digits

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17
Q

By law, the US treasury has to borrow from _____ bidders

A

non-competitive

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18
Q

The _____ rate from competitive investors will be extended to non-competitive investors

A

average interest rate

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19
Q

you have until ____ every ____ to submit your interest rate to the US treasury when bidding on a T-B

A

1pm, EST

Thursday

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20
Q

If you have a 3 month $10k TB with a 16% APR, what is the effective interest rate?

A

effective rate = Amount of Interest / Amount of Net Investment * 100%

16%/4 = 4%
4% * $10000 = $400
Net investment = 9600

400/9600 *100 = 4.16%

Rate = 4.16% * 4 = 16.67%

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21
Q

How often are treasury bills, notes, and bonds borrowed

A

Bill - every week
Note - every 6 weeks
Bond - every 8 weeks

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22
Q

The CAPM was developed by 3 American professors in….

A

1960s

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23
Q

Foundation of CAPM is that the rate investors are looking for is a function of:

A
  1. how the US govt finances its deficit
  2. the risk free rate (rf = Kf)
  3. the past performance of a stock
  4. the performance of the entire stock market
24
Q

The past performance of a certain stock vs the market is represented by:

A

a company’s Beta

25
Q

the risk free rate is equivalent to the rate of

A

1 year Treasury Bills

26
Q

Market Rate of Return (Km) - Risk Free RoR (Kf) =

A

Market Risk Premium

27
Q

If Kf = 16%, Beta = 1.8, and Km = 20%, what is the expected rate of return from investing in this company?

A

Ky = 16% + 1.8*(4%) = 23.2%

28
Q

Rate of inflation s embedded in…

A

the risk free rate of return

29
Q

Systematic risks are those risks which….

A

involved the entire economic system

30
Q

examples of systematic risk:

A

risk of
inflation
unemployment
higher Fed interest rates

31
Q

Unsystematic risks are …

A

those specific risks related to a particular industry or company

32
Q

unsystematic risks can be eliminated by

A

diversifying your portfolio

33
Q

When creating a cash payment budget, what item should not be included

A

depreciation

34
Q

In master budgets, NM stands for

A

not meaningful

35
Q

When and where were the IMF and World Bank founded

A

1944
Bretton Woods NH
44 allied nations

36
Q

Initially, the contribution quota expected of each country to the IMF was based on

A

the country’s participation in international trade

37
Q

A country can receive ___% of it’s quota in ____ if needed from the IMF

A

125%

hard currencies

38
Q

What conditions must a country meet in order to borrow from the IMF

A
  1. devalue its currency
  2. cut government subsidies
  3. cut government spending
39
Q

What is the main risk of devaluing your own currency

A

inflation

40
Q

The purpose of borrowing from the IMF is to address a

A

short-term balance of payment problem (x vs M)

41
Q

The purpose of borrowing from the World Bank is to fund

A

major infrastructure projects

42
Q

How many ships have been waiting recently at the port of Shanghai

A

750

43
Q

Stagflation describes a state of

A

inflation + poor economic outlook

44
Q

Reported inflation rate in April 2022 was

A

8.5% year over year

45
Q

unemployment rates are typically announced

A

1st Friday of the month

46
Q

National unemployment rate in March was

A

3.7%

47
Q

Full employment is when

A

unemployment rate is between 2%-4%

48
Q

state of full employment can result in

A

cost-push inflation

increased lab cost

49
Q

The highest increase in home income in 2021-2022 was achieved by the state of

A

New Hampshire

50
Q

In Exxon’s annual report, it was revealed that

A

a hedge fund tried to stage a proxy fight

51
Q

Macron was reelected president of France, the volatility of the election is ____ if you live in France and ____ if you are global investor

A

systematic risk

unsystematic risk

52
Q

If the European Central Bank raises interest rates, it will be the first time it’s done so in…

A

11 years

53
Q

Which major economies have increased their interest rate this year?

A 
US
Britain
Japan
India
Canada
Brazil
Russia
South Korea
Saudi Arabia
54
Q

According to the article, what is the projected 2022 inflation rate in the US

A

7.7%

55
Q

What is the projected 2022 inflation rate in the Eurozone

A

5.3%

56
Q

Which major economic power(s) has not raised it’s interest rate this year?

A

China

Eurozone

57
Q

What is the projected 2022 inflation rate in Russia

A

21.3%

Finance (9 decks)

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