Basic Finance MCQs with Answers including introduction and fundamental of finance for banking and business.
Basic Finance MCQs
The intrinsic value of call option is:
A. stock price ⁄ exercise price
B. stock price – exercise price
C. stock price + exercise price
D. stock price x exercise price
The type of voting in which the owner having half voting shares can elect board of directors is called:
A. directors voting
B. half voting
C. straight voting
D. owners voting
According to futures contract, the long position states the:
A. purchase of forward contracts
B. purchase of future contract
C. sale of futures contract
D. sales of forward contracts
The type of liability in which the stockholders losses are counted for only the invested amount in the firm is classified as:
A. counted liability
B. invested liability
C. unlimited liability
D. limited liability
The type of voting in which all the directors in voting lists are voted at same time is classified as:
A. cumulative voting
B. non-cumulative voting
C. dual class voting
D. limited voting
The stock holder who does not have any voting rights in the corporation is considered as:
A. sub class voter
B. preferred stockholder
C. common stock holder
D. cumulative voter
Consider buying the call option, if the price of stock falls then the buyer of call option has:
A. high potential of profit
B. low potential of profit
C. low potential of losses
D. high potential of losses
The process in which the group of investment banks distribute the securities is classified as:
A. task groups
B. syndicate
C. investment groups
D. securitize groups
The type of financial security whose payoff is linked to any other security is called:
A. strong security
B. semi-strong security
C. derivate security
D. non-derivate security
When the earnings are reinvested instead of payments of dividends, then the capital gains:
A. must increases
B. must decreases
C. must be zero
D. must be one
The intrinsic value of call option is considered as in the money if:
A. stock price > exercise price
B. stock price treasury price
C. treasury price < bond price
D. None of These
The type of trade members who take position for short period of time or sometimes for only few minutes are classified as:
A. scalpers
B. explorers
C. temporary position holders
D. professional position holders
The intrinsic value of call option is considered as out of the money, if:
A. bond price > treasury price
B. treasury price exercise price
C. stock price < exercise price
D. None of These
The type of contract which involves the exchange of assets that will occur in future at the price settled daily, is classified as:
A. spot contract
B. forward contract
C. future contracts
D. present contract
The prices that are adjusted day to day to picture the current conditions of future markets are classified as:
A. market future prices
B. market to market prices
C. market to invest prices
D. present market prices
The intrinsic value of option is subtracted from exercise price of an option to calculate:
A. forward price of asset
B. price of underlying asset
C. future price of asset
D. spot price of asset
The under writer spread is subtracted from gross proceeds to calculate:
A. Gross proceeds
B. cumulative proceeds
C. non-cumulative proceeds
D. net proceeds
The difference between the intrinsic value of option and the price of option is classified as:
A. spot value of option
B. time value of US treasury
C. time value of option
D. time value of bond
The position which occurs because of selling floor and buying cap is classified as:
A. floating collar
B. fixed collar
C. currency collar
D. collar
Consider buying the put option, if the price is lower at the expiration date of option then the:
A. liquidity will be higher
B. loss will be higher
C. profit will be lower
D. profit will be higher
The speed with which the prices of stocks are adjusted to unexpected news related to interest rates is called:
A. news efficiency
B. adjusted efficiency
C. expected efficiency
D. market efficiency
The difference between price of underlying asset and exercise price of option is classified as:
A. extrinsic value of European option
B. intrinsic value of option
C. extrinsic value of option
D. intrinsic value of European option
The number of shares outstanding are multiplied to price of stock to calculate:
A. secondary market values
B. current market values
C. past market values
D. primary market values
The particular place at which the transactions of New York stock exchange occurs is classified as:
A. trading post
B. issuance post
C. silence post
D. sellers post
The major participants in forward markets are:
A. commercial banks
B. broker deals
C. investment banks
D. all of the above
The stock markets in which the already issued stocks are resold and re-bought are classified as:
A. red herring stock market
B. preemptive stock market
C. silence stock market
D. secondary stock markets
The up-front fee which must be paid by the buyer to the seller is called:
A. call premium
B. discount premium
C. strike premium
D. exercise premium
The amount of money involved in swap transaction is classified as:
A. notion principal
B. swap principal
C. transaction principal
D. time value of swap
The price at which the stock is sold to investors by the investment banks is called:
A. Gross proceeds
B. cumulative proceeds
C. non-cumulative proceeds
D. net proceeds
When the price of underlying asset increases then the good option is:
A. buy the call option
B. sell the call option
C. buy the put option
D. sell the put option
In interest rate swap transaction, the party who pays the floating payments of interest is considered as:
A. notion buyer
B. notion seller
C. swap buyer
D. swap seller
The inverse relationship between price change and interest rate change is represented by:
A. negative discount
B. negative duration
C. positive duration
D. positive discount
The direct relationship between price change and interest rate change is represented by:
A. positive duration
B. positive discount
C. negative discount
D. negative duration
In zero coupon bonds, the increase in duration with respect to maturity must be at:
A. decreasing rate
B. increasing rate
C. alarming rate
D. inelastic rate
The type of bond for which the bonds present value is greater than bonds face value is classified as:
A. coupon bond
B. interest bonds
C. discount bond
D. premium bond
The bonds that does not pay any interest rate are considered as:
A. interest free bond
B. zero coupon bond
C. price less coupon bond
D. useless price bonds
For an investment, the weighted average time to maturity is considered as:
A. premium time
B. standard time
C. mean time
D. duration
For given change in interest rates, the percentage change in the present value of bond is classified as:
A. price sensitivity
B. yield sensitivity
C. maturity sensitivity
D. premium sensitivity
The commercial mortgages, farm mortgages and home mortgages are categories of:
A. swapped mortgages
B. sovereign mortgages
C. secondary mortgages
D. primary mortgagees
The mortgages used to purchase the shopping malls and office buildings are classified as:
A. developed mortgages
B. dwelling mortgages
C. commercial mortgages
D. non-commercial mortgages
The loan which is made available for businesses or individuals to buy land, home or other property is classified as:
A. secondary loan
B. primary loan
C. mortgages
D. swapped mortgages
The primary mortgages involve:
A. three institutions
B. single investor
C. multiple investor
D. multiple institutions
As compared to US certificate of deposit, the interest rate paid on the Eurodollar certificate of deposits is:
A. higher than other one
B. lower than other one
C. contraction than other one
D. expansionary than other one
The most flexible and liquid source of funding for savings banks is:
A. annual loan market
B. federal funds market
C. functional funding market
D. secured funding market
The forgone amount for holding the balances of cash at the time they are received is classified as:
A. forgone cost
B. debt cost
C. opportunity cost
D. balances cost
The overnight loans transaction are part of trading of:
A. extensive funds
B. federal funds
C. intensive funds
D. premium funds
The government issues treasury bills at the discounted rate from:
A. face value
B. book value
C. premium value
D. federal value
The financial instruments are traded in money markets and then traded in:
A. money markets
B. capital markets
C. debt markets
D. economic markets
The type of funds that have transfer transactions between financial institutions are classified as:
A. federal funds
B. premium funds
C. discount funds
D. mean funds
The interest rate at which the federal funds are borrowed and can be lent is classified as:
A. borrowing rate
B. supplying rate
C. lending rate
D. federal funds rate
The transaction of federal funds usually take place in the form of:
A. functional loans
B. annual loans
C. unsecured loans
D. secured loans
The difference between purchase price of treasury bills and the face value of treasury bills is considered as:
A. premium
B. discount
C. return
D. mean value
The bidder who can receive the allocation of treasury bills before all other bidders is the result of:
A. highest bidder
B. lower bidder
C. zero bidder
D. non-competitive bidder
The non-competitive bidding of treasury bills also allow participation of:
A. secured investors
B. federal investors
C. small investors
D. large investors
The type of market in which the short term instruments are traded and purchased by economic units, is classified as:
A. money markets
B. capital markets
C. debt markets
D. economic markets
Financial panic that produce large losses for public can cause:
A. serious damage to economy
B. problems for investors
C. pulling of funds
D. soundness of institutes
The group of dealers and brokers in financial institutions also include:
A. money and security brokers
B. capital brokers
C. mortgage brokers
D. expansionary brokers
The limit of getting treasury bills auctioned in a treasury auction is that no bidder can get more than:
A. 0.35
B. 0.3
C. 0.25
D. 0.2
The promissory notes issued by company for short term fund raising are unsecured are classified as:
A. unsecured notes
B. debt paper
C. term paper
D. commercial paper
The bankers acceptance which is usually time draft is fully backed by:
A. commercial banks
B. Swiss banks
C. agriculture banks
D. functional banks
The Federal Reserve decreases the money supply b:
A. selling Swiss bills
B. buying Swiss bills
C. selling treasury bills
D. buying treasury bills
In the Eurodollar market, the increase in demand of Euro dollars result in:
A. increase in LIBOR
B. decrease in LIBOR
C. increase in KIBOR
D. decrease in KIBOR
The Federal reserve, money market brokers and dealers, mutual funds and US treasury are all participants of:
A. liquid markets
B. money markets
C. transaction markets
D. functional markets
The negotiable certificate of deposit with one year maturity pays the interest:
A. annually
B. semi-annually
C. monthly
D. every two weeks
The type of bidding in which the bids are met before the allocation of competitive bidders is considered as:
A. firstly basis
B. preferential basis
C. federal basis
D. last basis
The international banker’s acceptance usually arises from underlying:
A. letter of confirmation
B. letter of transfer
C. letter of credits
D. letter of buying
The treasury bills are issued to raise significant amount of funds by:
A. US treasury
B. Australian treasury
C. Swiss treasury
D. functional treasury
The federal funds are loans borrowed and lent on:
A. single payment basis
B. monthly payment basis
C. semi-annual payment basis
D. annual payment basis
The non-competitive bidders get the allocation of treasury bills on:
A. federal basis
B. last basis
C. firstly basis
D. preferential basis
The submitted bids in the treasury bills auction consist of types which are:
A. competitive bids
B. non-competitive bids
C. treasury bids
D. both A and B
The process of issuing treasury bills is classified as:
A. treasury trading auction
B. treasury fund auction
C. treasury bills auction
D. treasury bills transfer
The financial instrument such as commercial paper can be sold:
A. issued by commercial banks
B. directly
C. with brokers or dealers
D. functional buyers
The funds transferred usually for a day between financial institutions are classified as:
A. federal funds
B. banker’s funds
C. debt funds
D. secured funds
The certificate of deposits which are usually negotiable are issued by:
A. banks
B. financial market
C. stock exchange
D. business corporations
The accounting entry of the institutions who lend federal funds to other institutions is posted as:
A. liability on balance sheet
B. assets on balance sheet
C. income in income statement
D. expense on income statement
The instrument used by Federal Reserve to smooth the money supply and interest rates include:
A. treasury notes
B. repurchase agreements
C. commercial payable notes
D. commercial receivable notes
In borrowing and lending of federal funds, the federal funds rate is result of function between:
A. assets and liability
B. cost and marketing
C. supply and demand
D. income and expense
The commercial paper issued with low interest rate thus the commercial paper are categorized as:
A. payables rating
B. commercial rating
C. poor credit rating
D. better credit rating
The price which is paid by the bidders and is accepted by all other bidders is classified as:
A. highest price
B. lowest price
C. zero price
D. peak price
The rates of certificate of deposits are mostly negotiated between:
A. bank and COD buyer
B. bank and stock market
C. stock market and COD buyer
D. indirect negotiations of buyers
The treasury bills have high liquidity because of:
A. extensive secondary markets
B. extensive primary markets
C. premium money markets
D. discounted money markets
The markets which reallocate liquid funds in relatively fixed amounts are classified as:
A. capital markets
B. debt markets
C. secondary markets
D. primary markets
The type of instrument whoever holds it, gets the interest and principal amount is classified as:
A. term instrument
B. interim instrument
C. primary instrument
D. bearer instrument
The interest rate of certificate of deposits is quoted using a time span of:
A. 250 days a year
B. 150 days a year
C. 365 day a year
D. 360 day a year
The type of market in which Eurodollar are traded is classified as:
A. brokerage market
B. contraction market
C. expansion market
D. Eurodollar market
For a particular security transaction, the agreement is classified as ‘reverse repo’ with the point of view of:
A. security liability
B. security buyer
C. security seller
D. security function
The bids of bidder which tells that how much treasury bills bidder wants to buy is classified as:
A. federal acceptance bid
B. bankers’ acceptance bid
C. non-competitive bids
D. competitive bids
The investors held commercial papers generally from:
A. issuance to maturity
B. within 1 to 2 days
C. within 3 to 4 days
D. within 4 to 5 days
The rate which is used in major banks in United States as a rate for industrial and commercial loans is:
A. London intra bank offered rate
B. London interbank offered rate
C. euro interbank offered rate
D. demand intra bank rate
For a particular security transaction, the agreement is ‘repo’ with the point of view of:
A. security seller
B. security buyer
C. security function
D. security function
The demand for heavy loans can cause:
A. excess funds for banks
B. deficiencies for banks
C. organized reservation
D. competitive reservations
The maximum maturity days of holding commercial paper are:
A. 170 days
B. 270 days
C. 120 days
D. 5 days
The liquidity status of certificate of deposit which is more negotiable is considered as:
A. certified liquidity
B. term liquidity
C. more liquid
D. less liquid
The negotiable deposit certificate are traded in:
A. secondary markets
B. primary markets
C. direct markets
D. indirect markets
High price to earnings ratio shows company’s:
A. Low dividends paid
B. High risk prospect
C. High growth prospect
D. High marginal rate
In internal rate of returns, discount rate which forces net present values to become zero is classified as:
A. Positive rate of return
B. Negative rate of return
C. External rate of return
D. Internal rate of return
Set of projects or set of investments usually maximize firm value is classified as:
A. Optimal capital budget
B. Minimum capital budget
C. Maximum capital budget
D. Greater capital budget
Modified rate of return and modified internal rate of return with exceed cost of capital if net present value is:
A. Positive
B. Negative
C. Zero
D. One
Number of years forecasted to recover an original investment is classified as:
A. Payback period
B. Forecasted period
C. Original period
D. Investment period
Process in which managers of company identify projects to add value is classified as:
A. Capital budgeting
B. Cost budgeting
C. Book value budgeting
D. Equity budgeting
Project whose cash flows are sufficient to repay capital invested for rate of return then net present value will be:
A. Negative
B. Zero
C. Positive
D. Independent
Other factors held constant, greater project liquidity is because of:
A. Less project returns
B. Greater project return
C. Shorter payback period
D. Greater payback period
An internal rate of return in capital budgeting can be modified to make it representative of:
A. Relative outflow
B. Relative inflow
C. Relative cost
D. Relative profitability
Situation in which firm limits expenditures on capital is classified as:
A. Optimal rationing
B. Capital rationing
C. Marginal rationing
D. Transaction rationing
Cash flows occurring with more than one change in sign of cash flow are classified as:
A. Non-normal cash flow
B. Normal cash flow
C. Normal costs
D. Non-normal costs
If net present value is positive, then profitability index will be:
A. Greater than two
B. Equal to
C. Less than one
D. Greater than one
Sum of discounted cash flows is best defined as:
A. Technical equity
B. Defined future value
C. Project net present value
D. Equity net present value
Cash outflows are costs of project and are represented by:
A. Negative numbers
B. Positive numbers
C. Hurdle number
D. Relative number
Reinvestment risk of bonds is higher on:
A. Short maturity bonds
B. High maturity bonds
C. High premium bonds
D. High inflated bonds
Type of bonds that pays no coupon payment but provides little appreciation are classified as:
A. Depreciated bond
B. Interest bond
C. Zero coupon bond
D. Appreciation bond
Bonds issued by small companies tend to have:
A. High liquidity premium
B. High inflation premium
C. High default premium
D. High yield premium
Coupon rate of bond is also called:
A. Nominal rate
B. Premium rate
C. Quoted rate
D. Both a and c
An increasing in interest rate leads to decline in value of:
A. Junk bonds
B. Outstanding bonds
C. Standing bonds
D. Premium bonds
Bonds issued by government and backed by Pak government are classified as:
A. Issued security
B. Treasury bonds
C. U.S bonds
D. Return security
Value generally promises to pay at maturity date and a firm borrows is considered as bond’s:
A. Bond value
B. Per value
C. State value
D. Par value
Maturity date decides at time of issuance of bond and legally permissible is classified as:
A. Original maturity
B. Permanent maturity
C. Artificial maturity
D. Valued maturity
Bonds issued by local and state governments with default risk are:
A. Municipal bonds
B. Corporation bonds
C. Default bonds
D. Zero bonds
Bond that has been issued in very recent timing is classified as:
A. Mature issue
B. Earning issue
C. New issue
D. Recent issue
Type of options that permit bond holder to buy stocks at stated price are classified as:
A. Provision
B. Guarantee
C. Warrants
D. Convertibles
An interest rate which is used in calculation of cash flows of bonds is called:
A. Required rate of redemption
B. Required rate of earning
C. Required rate of return
D. Required option
If market interest rate rises above coupon rate, then bond will be sold:
A. Equal to return rate
B. Seasoned price
C. Below its par value
D. Above its par value
Type of bonds that are issued by foreign governments or foreign corporations are classified as:
A. Zero risk bonds
B. Zero bonds
C. Foreign bonds
D. Government bonds
Rate of return (in percentages) consists of:
A. Capital gain yield interest yield
B. Return yield + stable yield
C. Return yield + unstable yield
D. Par value + market value
If market interest rate falls below coupon rate then bond will be sold:
A. Below its par value
B. Above its par value
C. Equal to return rate
D. Seasoned price
Yield of interest rate which is below than coupon rate, this yield is classified as:
A. Yield to maturity
B. Yield to call
C. Yield to earning
D. Yield to investors
An effect of interest rate risk and investment risk on a bond’s yield is classified as:
A. Reinvestment premium
B. Investment risk premium
C. Maturity risk premium
D. Defaulter’s premium
Coupon payment is calculated with help of interest rate, then this rate considers as:
A. Payment interest
B. Par interest
C. Coupon interest
D. Yearly interest rate
Coupon payment of bond which is fixed at time of issuance:
A. Remains same
B. Becomes stable
C. Becomes change
D. Becomes low
Market in which bonds are traded over-the-counter than in an organized exchange is classified as:
A. Organized markets
B. Trade markets
C. Counter markets
D. Bond markets
Reinvestment risk of bond’s is usually higher on:
A. Income bonds
B. Callable bonds
C. Premium bonds
D. Default free bonds
Bonds that can be converted into shares of common stock are classified as:
A. Convertible bonds
B. Stock bonds
C. Shared bonds
D. Common bonds
Rate on debt that increases as soon market rises is classified as:
A. Rising bet rate
B. Floating rate debt
C. Market rate debt
D. Stable debt rate
When price of bond is calculated below its par value, it is classified as:
A. classified bond
B. Discount bond
C. Compound bond
D. Consideration earning
Bonds with deferred call have protection which is classified as:
A. Provision protection
B. Provision protection
C. Deferred protection
D. Call protection
Real risk-free interest rate in addition with an inflation premium is equal to:
A. Required interest rate
B. Quoted risk-free interest rate
C. Liquidity risk-free interest rate
D. Premium risk-free interest rate
Stated value of bonds or face value is considered as:
A. State value
B. Par value
C. Bond value
D. Per value
A bond whose price will rise above its face value is classified as:
A. Premium face value
B. Premium bond
C. Premium stock
D. Premium warrants
If coupon rate is less than going rate of interest, then bond will be sold:
A. Seasoned par value
B. More than its par value
C. Seasoned par value
D. At par value
Price of an outstanding bond increases when market rate:
A. Never changes
B. Increases
C. Decreases
D. Earned
Type of bond which pays interest payment only when it earns is classified as:
A. Income bond
B. Interest bond
C. Payment bond
D. Earning bond
An average inflation rate which is expected over life of security is classified as:
A. Inflation premium
B. Off season premium
C. Nominal premium
D. Required premium
An inflation rate includes in bond’s interest rates is one which is inflation rate:
A. At bond issuance
B. Expected in future
C. Expected at time of maturity
D. Expected at deferred call
A market interest rate for specific type of bond is classified as bond’s:
A. Required rate of return
B. Required option
C. Required rate of redemption
D. Required rate of earning
An outstanding bond are also classified as:
A. Standing bonds
B. Outdated bonds
C. Dated bonds
D. Seasoned bonds
Coupon rate of convertible bond is:
A. Higher
B. Lower
C. Variable
D. Stable
An annual interest payment divided by current price of bond is considered as:
A. Current yield
B. Maturity yield
C. Return yield
D. Earning yield
Payment divided by par value is classified as:
A. Divisible payment
B. Coupon payment
C. Par payment
D. Per period payment
Treasury bonds are exposed to additional risks that are included:
A. Reinvestment risk
B. Interest rate risk
C. Investment risk
D. Both A and B
Bonds that have high liquidity premium are usually have:
A. Inflated trading
B. Default free trading
C. Less frequently traded
D. Frequently traded
Falling interest rate leads change to bondholder income which is:
A. Reduction in income
B. Increment in income
C. Matured income
D. Frequent income
Bonds issued by corporations and exposed to default risk are classified as:
A. Corporation bonds
B. Default bonds
C. Risk bonds
D. Zero risk bonds
A type of project whose cash flows would not depend on each other is classified as:
A. Project net gain
B. Independent projects
C. Dependent projects
D. Net value projects
Net present value, profitability index, payback and discounted payback are methods to:
A. Evaluate cash flow
B. Evaluate projects
C. Evaluate budgeting
D. Evaluate equity
Cash inflows are revenues of project and are represented by:
A. Hurdle number
B. Relative number
C. Negative numbers
D. Positive numbers
Cash flow which starts negative than positive then again positive cash flow is classified as:
A. Normal costs
B. Non-normal costs
C. Non-normal cash flow
D. Normal cash flow
If two independent projects having hurdle rate, then both projects should:
A. Be accepted
B. Not be accepted
C. Have capital acceptance
D. Have return rate acceptance
In estimating value of cash flows, compounded future value is classified as its:
A. Terminal value
B. Existed value
C. Quit value
D. Relative value
In capital budgeting, positive net present value results in:
A. Negative economic value added
B. Positive economic value added
C. Zero economic value added
D. Percent economic value added
Life that maximizes net present value of an asset is classified as:
A. Minimum life
B. Present value life
C. Economic life
D. Transaction life
First step in calculation of net present value is to find out:
A. Present value of equity
B. Future value of equity
C. Present value cash flow
D. Future value of cash flow
Present value of future cash flows is divided by an initial cost of project to calculate:
A. Negative index
B. Exchange index
C. Project index
D. Profitability index
Relationship between Economic Value Added (EVA) and Net Present Value (NPV) is considered as:
A. Valued relationship
B. Economic relationship
C. Direct relationship
D. Inverse relationship
Profitability index in capital budgeting is used for:
A. Negative projects
B. Relative projects
C. Evaluate projects
D. Earned projects
In mutually exclusive projects, project which is selected for comparison with others must have:
A. Higher net present value
B. Lower net present value
C. Zero net present value
D. All of above
A project whose cash flows are more than capital invested for rate of return then net present value will be:
A. Positive
B. Independent
C. Negative
D. Zero
An equity multiplier is multiplied to return on assets to calculate:
A. Return on assets
B. Return on multiplier
C. Return on turnover
D. Return on stock
Process of comparing company results with other leading firms is considered as:
A. Comparison
B. Analysis
C. Bench marking
D. Return analysis
High price to earning ratio shows company’s:
A. Low dividends paid
B. High risk prospect
C. High growth prospect
D. High marginal rate
Price earning ratio and price by cash flow ratio are classified as:
A. Marginal ratios
B. Equity ratios
C. Return ratios
D. Market value ratios
In capital budgeting, term of bond which has great sensitivity to interest rates is:
A. Long-term bonds
B. Short-term bonds
C. Internal term bonds
D. External term bonds
An equation in which total assets are multiplied to profit margin is classified as:
A. Du DuPont equation
B. Turnover equation
C. Preference equation
D. Common equation
Ratios which relate firm’s stock to its book value per share, cash flow and earnings are classified as:
A. Return ratios
B. Market value ratios
C. Marginal ratios
D. Equity ratios
Profit margin multiply assets turnover multiply equity multiplier is used to calculate:
A. Return on turnover
B. Return on stock
C. Return on assets
D. Return on equity
A point where profile of net present value crosses horizontal axis at plotted graph indicates project:
A. Costs
B. Cash flows
C. Internal rate of return
D. External rate of return
Projects which are mutually exclusive but different on scale of production or time of completion then the:
A. External return method
B. Net present value of method
C. Net future value method
D. Internal return method
Company low earning power and high interest cost cause financial changes which have:
A. High return on equity
B. High return on assets
C. Low return on assets
D. Low return on equity
In independent projects evaluation, results of internal rate of return and net present value lead to:
A. Cash flow decision
B. Cost decision
C. Same decisions
D. Different decisions
Price per share divided by earnings per share is formula for calculating:
A. Price earnings ratio
B. Earning price ratio
C. Pricing ratio
D. Earning ratio
Total assets divided common equity is a formula uses for calculating:
A. Equity multiplier
B. Graphical multiplier
C. Turnover multiplier
D. Stock multiplier
Companies that help to set benchmarks are classified as:
A. competitive companies
B. Benchmark companies
C. Analytical companies
D. Return companies
A techniques uses to identify financial statements trends are included:
A. Common size analysis
B. Percent change analysis
C. Returning ratios analysis
D. Both A and B
Price per ratio is divided by cash flow per share ratio which is used for calculating:
A. Dividend to stock ratio
B. Sales to growth ratio
C. Cash flow to price ratio
D. Price to cash flow ratio
A technique uses in comparative analysis of financial statement is:
A. Graphical analysis
B. Preference analysis
C. Common size analysis
D. Returning analysis
The Capital Asset Pricing Model calculate expected:
A. Risk
B. Risk and Return
C. Return
D. None of the above
If a company revaluates its fixed assets, the current ratio of the company will:
A. Improve if assets are revalued upward
B. Remain unaffected
C. Improve if assets are revalued downwards
D. Undergo change only
An Asset is:
A. Sources of funds
B. Use of funds
C. Inflow of funds
D. None of these
The formula to calculate the present value of a single cash flow is given by:
A. CF1 / (1+r)n
B. C2 / (1+r)
C. C0 + C (1+r)n
D. None of these
Choose from the following a symptom which is not relating to “Over Trading”:
A. Cash shortage
B. Low inventory turnover ratio
C. Low current ratio
D. High inventory turnover ratio
The Yield to Maturity of a bond is the same as:
A. The present value of the bond
B. The bonds internal rate of return
C. The future value of the bond
D. None of these
Who of the following make a broader use of accounting information:
A. Accountants
B. Financial Analysts
C. Auditors
D. Marketers
Which of the following refers to the difference between the sale price and cost of inventory:
A. Net loss
B. Net worth
C. Markup
D. Markdown
In case of international business which of the given factor(s) must be considered:
A. Role of foreign exchange
B. Balance of payments
C. Attitude of Governments
D. All of the given options
If you have Rs. 850 and you plan to save it for 4 years with an interest rate of 10%, what will be the future value of your savings:
A. Rs. 1,000
B. Rs. 1,244
C. Rs. 1,331
D. Rs. 1,464
Which of the following measure reveals how much profit a company generates with the money shareholders have invested:
A. Profit Margin
B. Return on Assets
C. Return on Equity
D. Debt-Equity Ratio
Which of the following ratios is NOT from the set of Asset Management Ratios:
A. Inventory Turnover Ratio
B. Receivable Turnover
C. Capital Intensity Ratio
D. Return on Assets
A firm has paid out Rs. 150,000 as dividends from its net income of Rs. 250,000. What is the retention ratio for the firm:
A. 12%
B. 25%
C. 40%
D. 60%
The most important item that can be extracted from financial statements is the actual ____ of the firm:
A. Net Working Capital
B. Cash Flow
C. Net Present Value
D. None of the given options
When the market’s required rate of return for a particular bond is much less than its coupon rate, the bond is selling at:
A. Premium
B. Discount
C. Par
D. Cannot be determined
Mr. Y and Mr. Z are planning to share their capital to run a business. They are going to employ which of the following type of business:
A. Sole-proprietorship
B. Partnership
C. Corporation
D. None of the given options
Which of the following ratios are particularly interesting to short term creditors:
A. Liquidity Ratios
B. Long-term Solvency Ratios
C. Profitability Ratios
D. Market Value Ratios
Standard Corporation sold fully depreciated equipment for Rs.5,000. This transaction will be reported on the cash flow statement as a(n):
A. Operating activity
B. Investing activity
C. Financing activity
D. None of the given options
If a firm uses cash to purchase inventory, its quick ratio will:
A. Increase
B. Decrease
C. Remain unaffected
D. Become zero
Which one of the following terms refers to the risk arises for bond owners from fluctuating interest rates:
A. Fluctuations Risk
B. Interest Rate Risk
C. Real-Time Risk
D. Inflation Risk
How many years will it take to pay off a Rs. 11,000 loan with a Rs. 1,241.08 annual payment and a 5% interest rate:
A. 6 years
B. 12 years
C. 24 years
D. 48 years
Which of the following is measured by retention ratio:
A. Operating efficiency
B. Asset use efficiency
C. Financial policy
D. Dividend policy
Business Finance addresses which of the following:
A. Capital budgeting
B. Capital structure
C. Working capital management
D. All of the given options
A company having a current ratio of 1 will have ____net working capital:
A. Positive
B. Negative
C. zero
D. None of the given options
Which of the given area is NOT addressed by Business Finance:
A. Financing
B. Investing
C. Managing day today expenses
D. None of the given options
In which of the following type of annuity, cash flows occur at the beginning of each period:
A. Ordinary annuity
B. Annuity due
C. Perpetuity
D. None of the given options
Which of the following item provides the important function of shielding part of income from taxes:
A. Inventory
B. Supplies
C. Machinery
D. Depreciation
In which form of Business, owners have limited liability:
A. sole proprietorship
B. partnership
C. joint stock company
D. none of the above
Which of the following ratios are particularly interesting to shortterm creditors:
A. Liquidity Ratios
B. Long-term Solvency Ratios
C. Profitability Ratios
D. Market Value Ratios
Which of the following is a special case of annuity, where the stream of cash flows continues forever:
A. Ordinary Annuity
B. Special Annuity
C. Annuity Due
D. Perpetuity
Quick Ratio is also known as:
A. Current Ratio
B. Acid-test Ratio
C. Cash Ratio
D. None of the given options
Which of the following ratios are intended to address the firm’s financial leverage:
A. Liquidity Ratios
B. Long-term Solvency Ratios
C. Asset Management Ratios
D. Profitability Ratios
Which of the following form of business organization is least regulated:
A. Sole-proprietorship
B. General Partnership
C. Limited Partnership
D. Corporation
The conflict of interest between stockholders and management is known as:
A. Agency problem
B. Interest conflict
C. Management conflict
D. Agency cost
A model which makes an assumption about the future growth of dividends is known as:
A. Dividend Price Model
B. Dividend Growth Model
C. Dividend Policy Model
D. All of the given options
____ refers to the most valuable alternative that is given up if a particular investment is undertaken:
A. Sunk cost
B. Opportunity cost
C. Financing cost
D. All of the given options
Which of the following is the cheapest source of financing available to a firm:
A. Bank loan
B. Commercial papers
C. Trade credit
D. None of the given options.
Average Accounting Return is a measure of accounting profit relative to:
A. Book value
B. Intrinsic value
C. Cost
D. Market value
Profitability index (PI) rule is to take an investment, if the index exceeds:
A. -1
B. 0
C. 1
D. 2
When real rate is high, all the interest rates tend to be:
A. Higher
B. Lower
C. Constant
D. None of These
Which of the following is known as the group of assets such as stocks and bonds held by an investor:
A. Stock Bundle
B. Portfolio
C. Capital Structure
D. None of These
A standardized financial statement presenting all items of the statement as a percentage of total is:
A. a common-size statement
B. an income statemen
C. a cash flow statement
D. a balance sheet
Which of the following is the process of planning and managing a firm‟s long-term investments:
A. Capital Structuring
B. Capital Rationing
C. Capital Budgeting
D. Working Capital Management
The principal amount of a bond at issue is called:
A. Par value
B. Coupon value
C. Present value of an annuity
D. Present value of a lump sum
The difference between current assets and current liabilities is known as:
A. Surplus Asset
B. Short-term Ratio
C. Working Capital
D. Current Ratio
A company having a current ratio of 1 will have ____net working capital:
A. Positive
B. Negative
C. zero
D. None of the given options
Which of the following is measured by profit margin:
A. Operating efficiency
B. Asset use efficiency
C. Financial policy
D. Dividend policy
A portion of profits, which a company retains itself for further expansion, is known as:
A. Dividends
B. Retained Earnings
C. Capital Gain
D. None of the given options
Quick Ratio is also known as:
A. Current Ratio
B. Acid-test Ratio
C. Cash Ratio
D. Solvency Ratio
Which of the following ratios are particularly interesting to short-term creditors:
A. Liquidity Ratios
B. Long-term Solvency Ratios
C. Profitability Ratios
D. Market Value Ratios
In which type of market, new securities are traded:
A. Primary market
B. Secondary market
C. Tertiary market
D. None of the given options
Which of the following terms refers to the use of debt financing:
A. Operating Leverage
B. Financial Leverage
C. Manufacturing Leverage
D. None of the given options
Which of the following costs are reported on the income statement as the cost of goods sold:
A. Product cost
B. Period cost
C. Both product cost and period cost
D. Neither product cost nor period cost
Finance is vital for which of the following business activity (activities):
A. Marketing Research
B. Product Pricing
C. Design of marketing and distribution channels
D. All of the given options
Which of the following refers to the cash flows that result from the firm‟s day-to-day activities of producing and selling:
A. Operating Cash Flows
B. Investing Cash Flows
C. Financing Cash Flows
D. All of the given options
Cash flow from assets involves which of the following component(s):
A. Operating cash flow
B. Capital spending
C. Change in net working capital
D. All of the given options
Financial policy is evaluated by which of the following:
A. Profit Margin
B. Total Assets Turnover
C. Debt-equity ratio
D. None of the given options
Product costs include which of the following:
A. Selling expenses
B. General expenses
C. Manufacturing overhead
D. Administrative expenses
Period costs include which of the following:
A. Selling expense
B. Raw material
C. Direct labour
D. Manufacturing overhead
The market price of a firm’s stock represents the focal judgment of all market participants as to the value of the:
A. Particular market
B. Particular firm
C. Particular creditor
D. Particular debtor
A major facet of financial management involves providing the financing necessary to support:
A. Liabilities
B. Debts
C. Loans
D. Assets
The Board of Directors sets company-wide policy and advices the CEO and other senior executives, who manage the company’s:
A. Managerial activities
B. Year-to-Year activities
C. Day-to-Day activities
D. Financial activities
The system by which companies are managed and controlled is known as:
A. Management System
B. Strategic System
C. Corporate Governance
D. Internal System
All the constituencies with a stake in the fortunes of the company are termed as:
A. Stakeholders
B. Directors
C. Chief executives
D. Subordinates
Stakeholders include:
A. Stakeholders
B. Creditors and customs
C. Employees and suppliers
D. All of Them
An individual authorized by another person, called the principle, to act on the latter’s on behalf is known as an/a:
A. Agent
B. Servant
C. Subordinate
D. Assistant
Profit maximization is the maximizing a firm’s Earning:
A. Before Tax
B. After Tax
C. Both A and B
D. None of Them
Annual cash dividends divided by annual earnings; or alternatively, dividends per share divided by earning per share is termed as:
A. Earning per share ratio
B. Proposed dividend ratio
C. Dividend pay-out ratio
D. Expected dividend ratio
The investment decision is the most important of the firm’s three major decisions, when it comes to:
A. Value creation
B. Value addition
C. Value proposition
D. Value deletion
Having some overall goal in mind, financial management is concerned with:
A. Acquisition of assets
B. Financing of assets
C. Management of assets
D. All of them
In financial markets, period of maturity less than one year of financial instruments is classified as:
A. Short-term
B. Long-term
C. Intermediate term
Price for debt is called:
A. Debt rate
B. Investment return
C. Discount rate
D. Interest rate
Notes, mortgages, bonds, stocks, treasury bills and consumer loans are classified as:
A. Financial instruments
B. Capital assets
C. Primary assets
D. Competitive instruments
Legal entity separation from its legal owners and managers with help of state laws is classified as:
A. Controlled corporate business
B. Corporation
C. Limited corporate business
D. Unlimited corporate business
Set of rules made by corporation founders such as directors election procedure are classified as:
A. Stock laws
B. By laws
C. Liability laws
D. Corporate laws
Price per share is $30 and an earnings per share is $3.5 then price for earnings ratio would be:
A. 8.57 times
B. 8.57%
C. 0.11 times
D. 11%
A technique uses in comparative analysis of financial statement is:
A. Graphical analysis
B. Preference analysis
C. Common size analysis
D. Returning analysis
Net income available to stockholders is $150 and total assets are $2,100 then return on total assets would be:
A. 0.07%
B. 7.14%
C. 0.05 times
D. 7.15 times
Return on assets = 5.5%, Total assets $3,000 and common equity $1,050 then return on equity would be:
A. $22,275
B. 15.71%
C. 1.93%
D. 1.925 times
Risk free rate is subtracted from expected market return is considered as:
A. Country risk
B. Diversifiable risk
C. Equity risk premium
D. Market risk premium
Capital budgeting decisions are analysed with help of weighted average and for this purpose:
A. Component cost is used
B. Common stock value is used
C. Cost of capital is used
D. Asset valuation is used
In weighted average cost of capital, capital components are funds that usually offer by:
A. Stock market
B. Investors
C. Capitalist
D. Exchange index
An interest rate which is paid by firm as soon as it issues debt is classified as pre-tax:
A. Term structure
B. Market premium
C. Risk premium
D. Cost of debt
Forecast by analysts, retention growth model and historical growth rates are methods used for an:
A. Estimate future growth
B. Estimate option future value
C. Estimate option present value
D. Estimate growth ratio
Capital gain expected by stockholders and dividends are included in:
A. Debt rate
B. Investment return
C. Interest rate
D. Cost of equity
Markets dealing loans of autos, education, vacations and appliances are considered as:
A. Consumer credit loans
B. Commercial markets
C. Residential markets
D. Mortgage markets
Bonds issued to individuals by corporations are classified as:
A. Municipal bonds
B. Corporate bonds
C. U.S treasury bonds
D. Mortgages
A markets which deals with long-term corporate stocks are classified as:
A. Liquid markets
B. Short-term markets
C. Capital markets
D. Money markets
Right held with corporations to call issued bonds for redemption is considered as:
A. Artificial provision
B. Call provision
C. Redeem provision
D. Original provision
Price of an outstanding bond decreases when market rate is:
A. Increased
B. Decreased
C. Earned
D. Never changed
Type of bond in which payments are made on basis of inflation index is classified as:
A. Borrowed bond
B. Purchasing power bond
C. Surplus bond
D. Deficit bond
If coupon rate is more than going rate of interest, then bond will be sold:
A. More than its par value
B. Seasoned par value
C. At par value
D. Below its par value
During planning period, a marginal cost for raising a new debt is classified as:
A. Debt cost
B. Relevant cost
C. Borrowing cost
D. Embedded cost
A risk associated with project and way considered by well diversified stockholder is classified as:
A. Expected risk
B. Beta risk
C. Industry risk
D. Returning risk
Variability for expected returns for projects is classified as:
A. Expected risk
B. Stand-alone risk
C. Variable risk
D. Returning risk
Method uses for an estimation of cost of equity is classified as:
A. Market cash flow
B. Future cash flow method
C. Discounted cash flow method
D. Present cash flow method
In weighted average capital, capital structure weights estimation does not rely on value of:
A. Investors equity
B. Market value of equity
C. Book value of equity
D. Stock equity
Beta which is estimated as regression slope coefficient is classified as:
A. Historical beta
B. Market beta
C. Coefficient beta
D. Riskier beta
In cash flow estimation, depreciation is considered as:
A. Cash charge
B. Non cash charge
C. Cash flow discounts
D. Net salvage discount
Rate of return which is required to satisfy stockholders and debt holders is classified as:
A. Weighted average cost of interest
B. Weighted average cost of capital
C. Weighted average salvage value
D. Mean cost of capital
In cash flow estimation and risk analysis, real rate will be equal to nominal rate if there is:
A. No inflation
B. High inflation
C. No transactions
D. No acceleration
Weighted average cost of debt, preferred stock and common equity is classified as:
A. Cost of salvage
B. Cost of interest
C. Cost of taxation
D. Cost of capital
In cash flow estimation, depreciation shelters company’s income from:
A. Expansion
B. Salvages
C. Taxation
D. Discounts
Nominal interest rates and nominal cash flows are usually reflected the:
A. Inflation effects
B. Opportunity effects
C. Equity effects
D. Debt effects
Relevant cash flow which company expects when its will implement project is classified as:
A. Irrelevant cash flow
B. Relevant cash flow
C. Incremental cash flow
D. Decrease cash flow
Cash flows that could be generated from an owned asset by company but not use in project are classified as:
A. Occurred cost
B. Mean cost
C. Opportunity costs
D. Weighted cost
Required rate of return in calculating bond’s cash flow is also classified as:
A. Going rate of return
B. Yield
C. Earning rate
D. Both A and B
Projects which are mutually exclusive but different on scale of production or time of completion then the:
A. External return method
B. Net present value of method
C. Net future value method
D. Internal return method
If stock market price is higher than strike price so call option:
A. Price will be lower
B. Rate will be higher
C. Price will be higher
D. Rate will be lower
Current option price is added to present value of portfolio for calculating:
A. Future value of portfolio
B. Current value of stock
C. Future value of stock
D. Present value of portfolio
Rate of required return by debt holders is used for estimation the:
A. Cost of debt
B. Cost of equity
C. Cost of internal capital
D. Cost of reserve assets
In retention growth model, payout ratio is subtracted from one to calculate:
A. Present value ratio
B. Future value ratio
C. Retention ratio
D. Growth ratio
Interest rates, tax rates and market risk premium are factors which an/a:
A. Industry cannot control
B. Industry cannot control
C. Firm must control
D. Firm cannot control
Double declining balance method and sum of years digits are included in:
A. Yearly method
B. Single methods
C. Double methods
D. Accelerated methods
Real rate expected cash flows and nominal rate expected cash flows must be:
A. Accelerated
B. Equal
C. Different
D. Inflated
Real interest rate and real cash flows do not include:
A. Equity effects
B. Debt effects
C. Inflation effects
D. Opportunity effects
Net investment in operating capital is subtracted from net operating profit after taxes to calculate:
A. Relevant inflows
B. Free cash flow
C. Relevant outflows
D. Cash outlay
Ability to trade at net price very quickly is classified as:
A. Original trading
B. Liquidity
C. Offline trading
D. Fixed price trading
Type of financial security in which firms do not borrow money rather lease their assets is classified as:
A. Leases
B. Preferred stocks
C. Common stocks
D. Corporate stocks
Hewlett-Packard and Microsoft are examples of:
A. Limited corporate business
B. Unlimited corporate business
C. Controlled corporate business
D. Corporation
A price for equity is called:
A. Interest rate
B. Cost of equity
C. Debt rate
D. Investment return
Document in a corporation which consists of amount of stock, name and addresses of directors is classified as:
A. Liability plan
B. Stock planning
C. Corporation paperwork
D. Charter
Financial security with low degree risk and investment held by businesses is classified as:
A. Treasury bills
B. Commercial paper
C. Negotiable certificate of deposit
D. Money market mutual funds
As free bonds issue for welfare by industrial agencies or pollution control agencies are classified as:
A. Agent bonds
B. Development bonds
C. Pollution control bonds
D. Both B and C
Risk of fall in income due to fall in interest rates in future is classified as:
A. Income risk
B. Investment risk
C. Reinvestment risk
D. Mature risk
If coupon rate is equal to going rate of interest, then bond will be sold:
A. At par value
B. Below its par value
C. More than its par value
D. Seasoned par value
Long period of bond maturity leads to:
A. More price changes
B. Stable prices
C. Standing prices
D. Mature prices
Financial markets include:
A. Primary markets
B. Capital markets
C. Physical asset markets
D. All of above
Bonds issue by corporations which are more riskier than preferred stocks are classified as:
A. Leases
B. Preferred stocks
C. Common stocks
D. Corporate stocks
Markets which deals with high liquid and short-term debt securities are classified as:
A. Capital markets
B. Money markets
C. Liquid markets
D. Short-term markets
Firm’s promise to pay and is backed or guaranteed by bank is classified as:
A. Customer’s acceptance
B. Banker’s acceptance
C. Federal acceptance
D. Treasury acceptance
Professionals such as doctors, accountants and lawyers often make corporations are classified as:
A. General professionals
B. Professional corporation
C. Professional association
D. Both B and C
Markets for products such as wheat, rice, cotton, real estate and autos dealing is classified as:
A. Physical asset markets
B. Intangible assets
C. Competitive markets
D. Easy markets
Bonds which are riskier than corporate bonds and are issued by major corporations are classified as:
A. Common stocks
B. Corporate stocks
C. Leases
D. Preferred stocks
In financial markets, period of maturity within one to five years of financial instruments is classified as:
A. Short-term
B. Long-term
C. Intermediate term
D. Capital term
Collection of money from investors and spending money in other investment activities is classified as:
A. Future funds
B. Hedge funds
C. Retirement funds
D. Pension funds
Price of stock that companies observe in financial markets is called:
A. Market price
B. Intrinsic price
C. Extrinsic price
D. Fundamental price
Difference between actual return on stock and predicted return is considered as:
A. Probability error
B. Actual error
C. Prediction error
D. Random error
Beta reflects stock risk for investors which is usually:
A. Individual
B. Collective
C. Weighted
D. Linear
Future beta is needed to calculate in most situations is classified as:
A. Historical betas
B. Adjusted betas
C. Standard betas
D. Varied betas
Money lends to corporations by banks is classified as:
A. Eurodollar market deposits
B. Commercial loans
C. Consumer credit loans
D. Consumer credit loans
Market where market makers keep record of stock of financial instruments is classified as:
A. Stock market
B. Dealer market
C. Outcry auction system
D. Face to face communication
Transfer through institutions such as mutual funds or banks are classified as:
A. Non-financial intermediary
B. Financial intermediary
C. Savers intermediary
D. Discounted intermediary
Federal Reserve policy and federal surplus or deficit of budget affect the:
A. Cost of production
B. Cost of money
C. Opportunity cost
D. Inflation risk
Funds which are used as interest-bearing checking accounts are classified as:
A. Money market funds
B. Capital market funds
C. Money mutual funds
D. Insurance money funds
Method of matching orders by posting orders of buying and selling is classified as:
A. Electronic communication network
B. Electronic dealer network
C. Electronic stock network
D. Electronic order network
Loans by finance companies, banks and credit unions is classified as:
A. Consumer credit loans
B. Dollar bonds
C. Eurodollar market deposits
D. Euro bonds
According to capital asset pricing model assumptions, quantities of all assets are:
A. Given and fixed
B. Not given and fixed
C. Not given and variable
D. Given and variable
According to capital asset pricing model assumptions, investors will borrow unlimited amount of capital at any given:
A. Identical and fixed returns
B. Risk free rate of interest
C. Fixed rate of interest
D. Risk free expected return
A high portfolio return is subtracted from low portfolio return to calculate:
A. HML portfolio
B. R portfolio
C. Subtracted portfolio
In capital market line, risk of efficient portfolio is measured by its:
A. Standard deviation
B. Variance
C. Aggregate risk
D. Ineffective risk
If market value is greater than book value, then investors for future stock are considered as:
A. Experienced
B. Inexperienced
C. Pessimistic
D. Optimistic
Stocks which has high book for market ratio are considered as:
A. More risky
B. Less risky
C. Pessimistic
D. Optimistic
An efficient set of portfolios represented through graph is classified as an:
A. Attained frontier
B. Efficient frontier
C. Inefficient frontier
D. Unattainable frontier
Stocks which has lower book for market ratio are considered as:
A. Optimistic
B. More risky
C. Less risky
D. Pessimistic
An unsystematic risk which can be eliminated but market risk is the:
A. Aggregate risk
B. Remaining risk
C. Effective risk
D. Ineffective risk
If book value is greater than market value comparison with investors for future stock are considered as:
A. Pessimistic
B. Optimistic
C. Experienced
D. Inexperienced
Positive minimum risk portfolio of any security shows that market security sold:
A. Equal to original price
B. Equal to sum of stocks
C. Less than original price
D. Greater than original price
Stock issued by company have lower rate of return because of:
A. High market to book ratio
B. Low book to market ratio
C. Low market to book ratio
D. High book to market ratio
In capital asset pricing model, assumptions must be followed including:
A. No taxes
B. No transaction costs
C. Fixed quantities of assets
D. All of above
Type of relationship exists between an expected return and risk of portfolio is classified as:
A. Non-linear
B. Linear
C. Fixed and aggregate
D. Non-fixed and non-aggregate
A theory which states that assets are traded at price equal to its intrinsic value is classified as:
A. Efficient money hypothesis
B. Efficient market hypothesis
C. Inefficient market hypothesis
D. Inefficient money hypothesis
In capital asset pricing model, characteristic line is classified as:
A. Regression line
B. Probability line
C. Scattered points
D. Weighted line
Betas tend to move towards 1.0 with passage of time are classified as:
A. Standard betas
B. Varied betas
C. Historical betas
D. Adjusted betas
All assets are perfectly divisible and liquid in:
A. Tax free pricing model
B. Cost free pricing model
C. Capital asset pricing model
D. Stock pricing model
Stock issued by company have higher rate of return because of:
A. Low market to book ratio
B. High book to market ratio
C. High market to book ratio
D. Low book to market ratio
According to capital asset pricing model assumptions, variances, expected returns and co-variance of all assets are:
A. Identical
B. Not identical
C. Fixed
D. Variable
The security which has characteristics of common stock and bonds both at same time is classified as:
A. preferred stock
B. voted stock
C. cumulative stock
D. fundamental stock
The capital gains are 14% and the periodic payments to stock holder are 11% then the return on stock investment for stock holder is:
A. 0.3
B. 0.24
C. 0.25
D. 0.15
The swaps that are classified as long term contracts are:
A. currency swaps
B. notion swaps
C. floating swaps
D. fixed swaps
The capital gains and dividends are considered as components of:
A. return
B. equity
C. spot rate contracts
D. forward rate contracts
The feature of stock which allows stock holders to buy the shares below than market price is called:
A. shares offering
B. price offering
C. rights offering
D. stock offering
The periodic payments of dividends are subtracted from return to stockholders to calculate:
A. gain on spot contract
B. loss on spot contract
C. gain on capital
D. loss on capital
The Black Scholes model consider the factors which affects an option price, the factors are:
A. spot price of asset
B. exercise price
C. price volatility
D. all of the above
The call option considering interest rates and have multiple exercise dates is classified as:
A. floor
B. cap
C. swaps multiplier
D. notion multiplier
Consider buying the call option, if the price of stock rises then the buyer of call option has:
A. low potential of losses
B. high potential of losses
C. high potential of profit
D. low potential of profit
The sum of capital gains and dividend payments which are paid to stock holders on periodic basis is equal to:
A. return to common stockholders
B. return on premium bonds
C. return to stock holder
D. return to preferred stock
The types of corporate stock that are traded in exchange markets are:
A. common stock
B. preferred stock
C. quoted stock
D. both A and B
The intrinsic value of option is $280 and the price of option is $350 then the time value of option is:
A. 125
B. 135
C. 280
D. 70
In interest rate swap transaction, the party who pays the fixed payments of interest is classified as:
A. notion buyer
B. notion seller
C. swap buyer
D. swap seller
The type of exchange members who only buy and sell for their personal account are classified as:
A. non-investment traders
B. professional traders
C. commercial traders
D. investment traders
The markets in which new securities are issued by the corporations to raise funds are called:
A. primary markets
B. secondary markets
C. Gross markets
D. proceeds markets
The difference between net proceeds and gross proceeds is called:
A. non-participating spread
B. participating spread
C. under writer spread
D. over writer spread
The composite value of traded stocks group of secondary markets is classified as:
A. stock index
B. primary index
C. stock market index
D. limited liability index
The contract which gives the rights to holders to sell or buy the asset at specific time period rather than giving the obligation is classified as:
A. option
B. contract
C. obligatory contract
D. non-obligatory contract
The example of derivative securities is:
A. return backed security
B. mortgage backed security
C. cash flow backed security
D. interest backed security
The orders that are transacted at specified price are considered as:
A. red herring order
B. limit order
C. unlimited order
D. assets order
The time value of an option is added into intrinsic value to calculate:
A. market index of an option
B. depreciated value of option
C. appreciated value of option
D. price of an option
In public corporation, the claim of fundamental ownership is called:
A. common stock
B. fundamental stock
C. corporate stock
D. claimed stock
The type of option that can be exercised only at the date of expiration is classified as:
A. European option
B. Canadian option
C. Australian option
D. American option
The capital gain is 9% and the return to stockholder is 18% then the periodic payments of dividends are:
A. 0.18
B. 0.27
C. 0.25
D. 0.09
The type of unit which guarantees that all the buying and selling will be made by traders of exchange is called:
A. trading house
B. guarantee house
C. clearing house
D. professional house
The capital gain is subtracted from return to stockholders to calculate:
A. periodic dividend payments
B. constant spot rate payment
C. constant forward rate payment
D. constant future rate payment
The type of contract which involves the future exchange of assets at a specified price is classified as:
A. future contracts
B. present contract
C. spot contract
D. forward contract
A swap that is used to evade the risk of exchange rate exists because of currency mismatching is classified as:
A. floating swaps
B. fixed swaps
C. currency swaps
D. notion swaps
The preferred stock is considered as hybrid security because it includes:
A. representation of ownership interest
B. fixed periodic payment
C. higher liquidity
D. both A and B
If the intrinsic value of an option is $450 and the price of an option is $560 then the time value of an option is:
A. 110
B. 1010
C. 450
D. 560
The price of an option is subtracted form time value of option to calculate:
A. book value index
B. market index
C. intrinsic value
D. extrinsic value
Consider the buying of put option, the probability that a buyer would have negative payoff increases with the:
A. increase in stock price
B. decrease in stock price
C. increase in maturity duration
D. decrease in maturity duration
The markets in which the derivatives are traded, are classified as:
A. assets backed market
B. cash flow backed markets
C. mortgage backed markets
D. derivative securities markets
The orders that are transacted at best available price are classified as:
A. post order
B. transacted order
C. market order
D. available order
The type of trading member who takes position every day and also liquidate it on the same day is classified as:
A. day traders
B. broker traders
C. non-position traders
D. commercial traders
The type of exchange members who place the buying and selling from the public are classified as:
A. floor broker
B. roof broker
C. broker of auction
D. leverage investment broker
The time period between the issuance of shares and filing of registration to Securities Exchange Commission is classified as:
A. filing period
B. quiet period
C. silence period
D. noise period
The type of option that gives the right to buyer to buy the underlying option at specific exercise price is considered as:
A. European option
B. Australian option
C. call option
D. put option
The put option considering interest rates and have multiple exercise dates is classified as:
A. swaps multiplier
B. notion multiplier
C. floor
D. cap
The fixed price at which the stock is purchased from issuer by the investment banks is called:
A. non-cumulative proceeds
B. net proceeds
C. Gross proceeds
D. cumulative proceeds
The firm in which the different voting rights are assigned for different classes of stock is classified as:
A. divided class firm
B. sub class firm
C. dual class firm
D. One class firm
The price of underlying asset is added into intrinsic value of option to calculate:
A. forward price of option
B. exercise price of option
C. book value of option
D. spot price of option
The pre-specified price at which the underlying asset is bought and sold is called as:
A. maturity price
B. strike price
C. exercise price
D. both B and C
The margin which must be maintained as soon as futures contract takes place is classified as:
A. spot margin
B. maintenance margin
C. futures margin
Also Read: Accounting MCQs, Economics MCQs and General Knowledge MCQs