A Currency Drain Is

question 50

Multiple Choice

A currency drain is

• A)an increase in currency held outside banks.
• B)when the Fed buys securities,but it is not when the Fed sells securities.
• C)when the Fed sells securities,but it is not when the Fed buys securities.
• D)when the Fed either buys or sells securities.
• E)when the Fed raises the required reserve ratio.

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Definitions:

Capital Asset Pricing Model

A model that describes the relationship between systemic risk and expected return for assets, particularly stocks, used to calculate a theoretically appropriate required rate of return for an asset, given its non-diversifiable risk.

Expected Rate

The anticipated return on an investment based on historical averages, interest rates, or economic indicators.

Illiquidity Premiums

Additional return expected by investors for holding assets that are difficult to trade quickly without significant price concessions.

Systematic Risk Factors

Events or conditions that affect all assets to some degree, such as macroeconomic changes, geopolitical incidents, or widespread financial crises.