CAPM, International Finance

Question 1

CAPM =

Answer 1

Capital Asset Pricing Model

Question 2

A Master Budget consist of a

Answer 2

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

Question 3

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

Answer 3

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

Question 4

What is the current US budget deficit

Answer 4

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

Question 5

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

Answer 5

Weekly basis

Question 6

What is the risk of a treasury bill?

Answer 6

ZERO

Question 7

What values are government securities issued for?

Answer 7

Minimum $1000, and in multiples of $1000

Question 8

What are the maturity options of Treasury Bills

Answer 8

3 months, 6 months, 1 year

Question 9

What government securities pay interest up front

Answer 9

3 and 6 month treasury bills

Question 10

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

Answer 10

semi-annually

Question 11

What is the difference between treasury notes and treasury bonds?

Answer 11

the maturity

Question 12

What range of maturity are treasury notes issued?

Answer 12

2-10 years

Question 13

What range of maturity are treasury bonds issued?

Answer 13

10, 20, and 30 years

most popular - 30 year

Question 14

How is interested determined for a treasury bill?

Answer 14

Auction format

Question 15

Bids for treasury bills are either ____ or ____

Answer 15

competitive or non-competitive

Question 16

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

Answer 16

4 significant digits

Question 17

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

Answer 17

non-competitive

Question 18

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

Answer 18

average interest rate

Question 19

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

Answer 19

1pm, EST

Thursday

Question 20

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

Answer 20

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%

Question 21

How often are treasury bills, notes, and bonds borrowed

Answer 21

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

Question 22

The CAPM was developed by 3 American professors in….

Answer 22

1960s

Question 23

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

Answer 23

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

Question 24

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

Answer 24

a company’s Beta

Question 25

the risk free rate is equivalent to the rate of

Answer 25

1 year Treasury Bills

Question 26

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

Answer 26

Market Risk Premium

Question 27

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

Answer 27

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

Question 28

Rate of inflation s embedded in...

Answer 28

the risk free rate of return

Question 29

Systematic risks are those risks which....

Answer 29

involved the entire economic system

Question 30

examples of systematic risk:

Answer 30

risk of inflation unemployment higher Fed interest rates

Question 31

Unsystematic risks are ...

Answer 31

those specific risks related to a particular industry or company

Question 32

unsystematic risks can be eliminated by

Answer 32

diversifying your portfolio

Question 33

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

Answer 33

depreciation

Question 34

In master budgets, NM stands for

Answer 34

not meaningful

Question 35

When and where were the IMF and World Bank founded

Answer 35

1944 Bretton Woods NH 44 allied nations

Question 36

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

Answer 36

the country's participation in international trade

Question 37

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

Answer 37

125% | hard currencies

Question 38

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

Answer 38

1. devalue its currency 2. cut government subsidies 3. cut government spending

Question 39

What is the main risk of devaluing your own currency

Answer 39

inflation

Question 40

The purpose of borrowing from the IMF is to address a

Answer 40

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

Question 41

The purpose of borrowing from the World Bank is to fund

Answer 41

major infrastructure projects

Question 42

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

Answer 42

750

Question 43

Stagflation describes a state of

Answer 43

inflation + poor economic outlook

Question 44

Reported inflation rate in April 2022 was

Answer 44

8.5% year over year

Question 45

unemployment rates are typically announced

Answer 45

1st Friday of the month

Question 46

National unemployment rate in March was

Answer 46

3.7%

Question 47

Full employment is when

Answer 47

unemployment rate is between 2%-4%

Question 48

state of full employment can result in

Answer 48

cost-push inflation | increased lab cost

Question 49

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

Answer 49

New Hampshire

Question 50

In Exxon's annual report, it was revealed that

Answer 50

a hedge fund tried to stage a proxy fight

Question 51

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

Answer 51

systematic risk | unsystematic risk

Question 52

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

Answer 52

11 years

Question 53

Which major economies have increased their interest rate this year?

Answer 53

``` US Britain Japan India Canada Brazil Russia South Korea Saudi Arabia ```

Question 54

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

Answer 54

7.7%

Question 55

What is the projected 2022 inflation rate in the Eurozone

Answer 55

5.3%

Question 56

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

Answer 56

China | Eurozone

Question 57

What is the projected 2022 inflation rate in Russia

Answer 57

21.3%