In Addition to the Assumptions of the Traditional Capital Asset

question 48

Multiple Choice

In addition to the assumptions of the traditional capital asset pricing model, which of conditions a) through c) are necessary for the international asset pricing model to hold?

• A) investors have identical consumption baskets
• B) investors only care about returns in their functional currency
• C) purchasing power parity holds
• D) More than one of the above
• E) None of the above

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Definitions:

Constant Mesh

Gears positioned to remain in permanent mesh, not engaged and disengaged by shifting action.

Sliding Clutch

Actuated by a shift yoke, used to engage a gear on a shaft. Also known as a dog clutch.

NPV

Net Present Value; a method used in capital budgeting to assess the profitability of a project or investment by calculating the difference between the present value of cash inflows and outflows.

CCA Rate

Stands for Capital Cost Allowance rate, which is a tax deduction in Canada that represents a business's investment in certain assets depreciating over time.