Q1: Basis Point in the context of interest rates is equal to
Answer: one hundredth of one percentAnswer
Q2: Call option means
Answer: right to buy without obligationAnswer
Q3: Commercial Papers are
Answer: unsecured promissory notesAnswer
Q4: REPO transactions means
Answer: Purchase as well as sale simultaneouslyAnswer
Q5: Tax Haven means
Answer: a country where taxes are lowAnswer
Q6: (1 + i)n stands for
Answer: FVIFAnswer
Q7: (I) A bond is a debt security that promises to make payments periodically for a specified period of time. (II) A stock is a security that is a claim on the earnings and assets of a corporation
Answer: Both are trueAnswer
Q8: (I) Banks are financial intermediaries that accept deposits and make loans. (II) Included under the term ‘banks’ are firms such as commercial banks, savings and loan associations, mutual savings banks, credit unions, and insurance companies
Answer: (I) is true, (II) falseAnswer
Q9: (I) Debt markets are often referred to generically as the bond market. (II) A bond is a security that is a claim on the earnings and assets of a corporation
Answer: Both are trueAnswer
Q10: A 55 year old investor, who is employed and earning well, can be said to be in
Answer: Transition stageAnswer
Q11: A bank’s primary reserves include
Answer: All these—vault cashAnswer
deposits at the Federal Reserve
Q12: A bond of Rs. 1000 bearing coupon rate of 12% is redeemable at par in 10 yrs. If the required rate of return is 10% the value of bond is
Answer: 1000Answer
Q13: A company can improve (lower) its debt-to-total asset ratio by doing which of the following
Answer: Sell common stockAnswer
Q14: A company involved in foreign exchange transactions is exposed to___risk
Answer: Exchange riskAnswer
Q15: A company’s___is (are) potentially the most effective instrument of good corporate governance
Answer: Board of directorsAnswer
Q16: A criticism of rupee-cost averaging is
Answer: It does not tell you when to but, sell or switch from one scheme to anotherAnswer
Q17: A declining stock market index due to lower share prices
Answer: All These—(a) Reduces people’s wealth and as a result may reduce their willingness to spendAnswer
(c) Decreases the amount of funds that business firms can raise by selling newly issued stock
Q18: A FII can invest in a mutual fund through its
Answer: RBI current accountAnswer
Q19: A Finance Manager’s main objective is
Answer: These Two—Procuring funds for the firm through the loans, issue of shares and debentures etc.Answer
Maximizing the wealth of shareholders by increasing earnings per share
Q20: A Financial System
Answer: All These—Accelerates economic developmentAnswer
Helps companies to mobilize funds
Is inclusive of financial markets, financial institutions and financial instruments
Q21: A fund manager who believes in the growth philosophy looks for companies with
Answer: Above average earnings growthAnswer
Q22: A lease which is generally not cancellable and coers full economic life of the asset is known as
Answer: Finance leaseAnswer
Q23: A lower domestic money supply causes the domestic currency to
Answer: Appreciate more in the short run than in the long runAnswer
Q24: A market value of Rs.100 par value bond carrying a coupon rate of 15% and maturing after 5 years is Rs. 110. Which of the following is the yield to maturity on this bond
Answer: 12.38Answer
Q25: A multinational company that is faced with mild interference up to complete confiscation of all assets is encountering___
Answer: Political risk exposureAnswer
Q26: A mutual fund can operate as a venture capital fund
Answer: Correct – TrueAnswer
Q27: A mutual fund cannot invest more than___% of its net assets in un-rated debt of one issuer. Total investments in un-rated debt cannot exceed___% of net assets
Answer: 10; 25Answer
Q28: A nation’s currency will appreciate in the long run if the nation exhibits which of the following characteristics
Answer: high productivity growth and increased tariffs on importsAnswer
Q29: A preferred stock will pay a dividend of USD1.25 in the upcoming year, and every year thereafter, i.e., dividends are not expected to grow. You require a return of 12% on this stock. Use the constant growth DDM to calculate the intrinsic value of this preferred stock
Answer: USD10.42Answer
Q30: A preferred stock will pay a dividend of USD2.75 in the upcoming year, and every year thereafter, i.e., dividends are not expected to grow. You require a return of 10% on this stock. Use the constant growth DDM to calculate the intrinsic value of this preferred stock
Answer: USD27.50Answer
Q31: A preferred stock will pay a dividend of USD3.00 in the upcoming year, and every year thereafter, i.e., dividends are not expected to grow. You require a return of 9% on this stock. Use the constant growth DDM to calculate the intrinsic value of this preferred stock
Answer: USD33.33Answer
Q32: A preferred stock will pay a dividend of USD3.50 in the upcoming year, and every year thereafter, i.e., dividends are not expected to grow. You require a return of 11% on this stock. Use the constant growth DDM to calculate the intrinsic value of this preferred stock
Answer: USD31.82Answer
Q33: A preferred stock will pay a dividend of USD7.50 in the upcoming year, and every year thereafter, i.e., dividends are not expected to grow. You require a return of 10% on this stock. Use the constant growth DDM to calculate the intrinsic value of this preferred stock
Answer: None of these—USD0.75Answer
USD7.50
USD64.12
USD56.25 [Hint-*7.50 / .10 = 75.00]
Q34: A proposal is not a Capital Budgeting proposal if it
Answer: brings short-term benefits onlyAnswer
Q35: A rising stock market index due to higher share prices
Answer: All These—(a) Increases people’s wealth and as a result may increase their willingness to spendAnswer
(b) Increases the amount of funds that business firms can raise by selling newly issued stock
Q36: A Rs.100 par value bond bearing a coupon rate of 10% will mature after 6 years. If the discount rate is 15%, which of the following is the value of the bond
Answer: Rs. 81.04Answer
Q37: A short term lease which is of tern cancellable is known as
Answer: Finance leaseAnswer
Q38: A special purpose vehicle (SPV) raises money by selling___where interest and principal payments are provided by cash flows from a discrete pool of assets
Answer: Asset-backed securitiesAnswer
Q39: A systematic withdrawal plan is ideal for investors who
Answer: Prefer a regular income streamAnswer
Q40: A tender offer is
Answer: a would-be acquirer’s offer to buy stock directly from shareholdersAnswer
Q41: A U.S. company has an affiliate in Mexico. This affiliate has exposed assets of 200 million pesos and exposed liabilities of 300 million pesos. If the exchange rate appreciates from USD0.0004 per peso to USD0.0005 per peso, what is the company’s translation gain or loss
Answer: -USD10,000Answer
Q42: A weakening of the U.S. dollar with respect to the British pound would likely reduce the U.S. exports to Britain and increase U.S. imports from Britain
Answer: Correct – TrueAnswer
Q43: A11 technical aspects of the implementation of the project are considered in___appraisal
Answer: TechnicalAnswer
Q44: ABC Ltd. has a Current Ratio of 1.5: 1 and Net Current Assets of Rs. 5,00,000. What are the Current Assets
Answer: Rs. 1,500,000Answer
Q45: According to the Walters model, a firm should have 100% dividend pay-out ratio when
Answer: r = keAnswer
Q46: Advance received from the customers is
Answer: An item of current liabilitiesAnswer
Q47: Advantage of Debt financing is
Answer: All These—Interest is tax-deductibleAnswer
It reduces WACC
Does not dilute owners control
Q48: All merchant bankers have to be registered with
Answer: SEBIAnswer
Q49: All of the following are financial intermediaries except
Answer: None of These—Insurance companiesAnswer
Pension funds
Mutual funds
Q50: All of the following are hedges against exchange-rate risk EXCEPT
Answer: Use of spot marketAnswer
Q51: All other things equal, an increase in inflation in Mexico shifts the supply of dollars___, the demand for dollars to the___, and causes a (n)___in the peso relative to the dollar
Answer: left; right; depreciationAnswer
Q52: Aloan of Rs.5,00,000 is to be repaid in 10 equal instalments. If the loan carries 12% interest p.a.. What is the value of one installment
Answer: 88492Answer
Q53: Among the elements that are to be examined under commercial appraisal, the most crucial one is the___
Answer: Demand for the productAnswer
Q54: An asset management company is formed
Answer: To manage mutual funds investmentsAnswer
Q55: An employee of a bank deposits Rs.30,000 into his FD A/c at the end of each year for 20 yrs. What is the amount he will accumulate in his FD at the end of 20 years, if the rate of interest is 9%
Answer: 1534800Answer
Q56: An example of liquidity ratio is
Answer: Current ratioAnswer
Q57: An important routine function of a Federal Reserve Bank is to
Answer: provide facilities by which banks may clear and collect checksAnswer
Q58: An increase in the current account deficit will place___pressure on the home currency value, other things equal
Answer: downwardAnswer
Q59: An individual deposits an annual bonus into a savings account that pays 5% interest compounded annually. The size of the bonus increases by Rs200 each year and the initial bonus amount at t=1 was Rs250. Determine how much will be in the account immediately after the fifth deposit
Answer: F = Rs3483.89Answer
Q60: An infinite series of periodic cash flows growing at a constant rate is
Answer: AnnuityAnswer
Q61: An offer document of an open ended fund has to be revised
Answer: Once in two yearsAnswer
Q62: An open ended fund can change its fundamental attributes by
Answer: Allowing investors to exit at NAV without a loadAnswer
Q63: Apex regulatory body for insurance sector is
Answer: IRDAAnswer
Q64: are analysts who use information concerning current and prospective
Answer: Credit analystsAnswer
Q65: Assest Securitization is
Answer: Provide adequate collateral security to bank prior to raising loansAnswer
Q66: Asset Liability Management for the banks involves
Answer: It is a kind of risk management technique adopted by banksAnswer
Q67: Assume that a bank’s bid rate on Swiss francs is £0.25 and its ask rate is £0.26. Its bid-ask percentage spread is
Answer: 0.04%Answer
Q68: Assume the Canadian dollar is equal to USD.88 and the Peruvian Sol is equal to USD.35. The value of the Peruvian Sol in Canadian dollars is
Answer: About .3977 Canadian dollarsAnswer
Q69: Assume the nominal interest rates (annual) in the country of Fredonia and the United States are 6% and 12% respectively. What is the implied 90-day forward rate if the current spot rate is 5 Fredonia marks (FM) per U.S. dollar
Answer: 4.927Answer
Q70: At the end of the year, goods that are unsold are deducted from
Answer: Cost of goods soldAnswer
Q71: Average collection period is equal to
Answer: 360/ Receivables Turnover RatioAnswer
Q72: A___allows the borrower to have credit up to some maximum amount over a specific period, but the notes are usually 90 days and allow the company to renew or borrow additionally
Answer: Revolving credit agreementAnswer
Q73: A___forbids the future pledging or mortgaging of any of the borrower’s assets
Answer: Negative pledge clauseAnswer
Q74: A___is a continuously offered debt instrument that is designed to fill the gap between commercial paper and long-term bonds with maturities currently ranging from 9 months to 30 years and has gained favor from the existence of shelf registration
Answer: Medium-term noteAnswer
Q75: A___is charged by the lender to hold credit open for the borrower. For example, if the firm only uses USD100,000 of a USD200,000 limit, then the firm might pay the lender USD500 for the unused limit in addition to the interest on the amount borrowed
Answer: Commitment feeAnswer
Q76: A___is generally considered debt that is originally scheduled to be repaid between 1 to 10 years under a formal loan agreement and is usually amortized (principal and interest are paid) in equal periodic installments
Answer: Term loanAnswer
Q77: A___is not a relevant cost for the project decision
Answer: Sunk costAnswer
Q78: A___represents any restriction imposed on a borrower by a lender and would be part of the loan agreement
Answer: CovenantAnswer
Q79: A___specifies all of the terms of a loan and the obligations of the borrower
Answer: Loan agreementAnswer
Q80: Bad debt cost is not borne by factor in case of
Answer: Pure factoringAnswer
Q81: Balanced funds provide
Answer: Steady returnAnswer
Q82: Bank Assurance refers to which of the following
Answer: A tie up between insurance and bank whereby the insurance company can use the sales channel of the bankAnswer
Q83: Banks are important to the study of money and the economy because they
Answer: Provide a channel for linking those who want to save with those who want to investAnswer
Q84: Banks create money when they
Answer: expand loans and buy securitiesAnswer
Q85: Banks, savings and loan associations, mutual savings banks, and credit unions
Answer: Have been providing services only to small depositors since deregulationAnswer
Q86: Basic determinant of Foreign Capital inflow are
Answer: All these—Imbalances in savings and investments leading to current account gaps Answer
Legal and Institutional Structure
Expected rate of return
Q87: Basic objective of a money market mutual fund is
Answer: None of a and b—a. Guaranteed rate of returnAnswer
b. Investment in short – term securities
Q88: Bridge Finance is meant for
Answer: Short term financingAnswer
Q89: Bubba Gumm Company has an expected ROE of 9%. The dividend growth rate will be___if the firm follows a policy of plowing back 10% of earnings
Answer: None of These—90%Answer
10%
9%
0.9% [*It should be 81% [formula = (1- payout ratio) x ROE]
Q90: C.R.A. is banking parlance stands for
Answer: Credit Rating AgencyAnswer
Q91: Call money market
Answer: All These—Trades in surplus funds of the banksAnswer
Deals in commercial paper
Helps in maintenance of statutory liquidity ratio
Q92: Capital Adequacy refers to which of the following
Answer: It is the total capital of the bankAnswer
Q93: Capital Budgeting is a part of
Answer: Investment DecisionAnswer
Q94: Capital Budgeting means
Answer: Financing of the capital for investments in the long term Fixed assetsAnswer
Q95: Capital gains taxes are imposed on
Answer: due to change in pricesAnswer
Q96: Capital intensive industries require___amount of working capital
Answer: None of these—LowerAnswer
Medium
Higher
Q97: Capital structure of a firm means
Answer: The proportion of Debt and equityAnswer
Q98: Capital structure of ABC Ltd. consists of equity share capital of Rs. 1,00,000 (10,000 share of Rs. 10 each) and 8% debentures of Rs. 50,000 and earning before interest and tax is Rs. 20,000. The degree of financial leverage is
Answer: 1.25Answer
Q99: Cash credits which are a form of short term bank borrowing, actually end up becoming long term advances in many cases due to
Answer: Conversion of cash credit into overdraftAnswer
Q100: Changes in stock prices
Answer: All These—(a) Affect people’s wealth and their willingness to spendAnswer
(b) Affect firm’s decisions to sell stock to finance investment spending.
(c) Are characterized by considerable fluctuations
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