Q1: Basis Point in the context of interest rates is equal to
Answer
Answer: one hundredth of one percent
Q2: Call option means
Answer
Answer: right to buy without obligation
Q3: Commercial Papers are
Answer
Answer: unsecured promissory notes
Q4: REPO transactions means
Answer
Answer: Purchase as well as sale simultaneously
Q5: Tax Haven means
Answer
Answer: a country where taxes are low
Q6: (1 + i)n stands for
Answer
Answer: FVIF
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
Answer: Both are true
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
Answer: (I) is true, (II) false
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
Answer: Both are true
Q10: A 55 year old investor, who is employed and earning well, can be said to be in
Answer
Answer: Transition stage
Q11: A bank’s primary reserves include
Answer
Answer: All these—vault cash
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
Answer: 1000
Q13: A company can improve (lower) its debt-to-total asset ratio by doing which of the following
Answer
Answer: Sell common stock
Q14: A company involved in foreign exchange transactions is exposed to___risk
Answer
Answer: Exchange risk
Q15: A company’s___is (are) potentially the most effective instrument of good corporate governance
Answer
Answer: Board of directors
Q16: A criticism of rupee-cost averaging is
Answer
Answer: It does not tell you when to but, sell or switch from one scheme to another
Q17: A declining stock market index due to lower share prices
Answer
Answer: All These—(a) Reduces people’s wealth and as a result may reduce their willingness to spend
(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
Answer: RBI current account
Q19: A Finance Manager’s main objective is
Answer
Answer: These Two—Procuring funds for the firm through the loans, issue of shares and debentures etc.
Maximizing the wealth of shareholders by increasing earnings per share
Q20: A Financial System
Answer
Answer: All These—Accelerates economic development
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
Answer: Above average earnings growth
Q22: A lease which is generally not cancellable and coers full economic life of the asset is known as
Answer
Answer: Finance lease
Q23: A lower domestic money supply causes the domestic currency to
Answer
Answer: Appreciate more in the short run than in the long run
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
Answer: 12.38
Q25: A multinational company that is faced with mild interference up to complete confiscation of all assets is encountering___
Answer
Answer: Political risk exposure
Q26: A mutual fund can operate as a venture capital fund
Answer
Answer: Correct – True
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
Answer: 10; 25
Q28: A nation’s currency will appreciate in the long run if the nation exhibits which of the following characteristics
Answer
Answer: high productivity growth and increased tariffs on imports
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
Answer: USD10.42
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
Answer: USD27.50
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
Answer: USD33.33
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
Answer: USD31.82
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
Answer: None of these—USD0.75
USD7.50
USD64.12
USD56.25 [Hint-*7.50 / .10 = 75.00]
Q34: A proposal is not a Capital Budgeting proposal if it
Answer
Answer: brings short-term benefits only
Q35: A rising stock market index due to higher share prices
Answer
Answer: All These—(a) Increases people’s wealth and as a result may increase their willingness to spend
(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
Answer: Rs. 81.04
Q37: A short term lease which is of tern cancellable is known as
Answer
Answer: Finance lease
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
Answer: Asset-backed securities
Q39: A systematic withdrawal plan is ideal for investors who
Answer
Answer: Prefer a regular income stream
Q40: A tender offer is
Answer
Answer: a would-be acquirer’s offer to buy stock directly from shareholders
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
Answer: -USD10,000
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
Answer: Correct – True
Q43: A11 technical aspects of the implementation of the project are considered in___appraisal
Answer
Answer: Technical
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
Answer: Rs. 1,500,000
Q45: According to the Walters model, a firm should have 100% dividend pay-out ratio when
Answer
Answer: r = ke
Q46: Advance received from the customers is
Answer
Answer: An item of current liabilities
Q47: Advantage of Debt financing is
Answer
Answer: All These—Interest is tax-deductible
It reduces WACC
Does not dilute owners control
Q48: All merchant bankers have to be registered with
Answer
Answer: SEBI
Q49: All of the following are financial intermediaries except
Answer
Answer: None of These—Insurance companies
Pension funds
Mutual funds
Q50: All of the following are hedges against exchange-rate risk EXCEPT
Answer
Answer: Use of spot market
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
Answer: left; right; depreciation
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
Answer: 88492
Q53: Among the elements that are to be examined under commercial appraisal, the most crucial one is the___
Answer
Answer: Demand for the product
Q54: An asset management company is formed
Answer
Answer: To manage mutual funds investments
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
Answer: 1534800
Q56: An example of liquidity ratio is
Answer
Answer: Current ratio
Q57: An important routine function of a Federal Reserve Bank is to
Answer
Answer: provide facilities by which banks may clear and collect checks
Q58: An increase in the current account deficit will place___pressure on the home currency value, other things equal
Answer
Answer: downward
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
Answer: F = Rs3483.89
Q60: An infinite series of periodic cash flows growing at a constant rate is
Answer
Answer: Annuity
Q61: An offer document of an open ended fund has to be revised
Answer
Answer: Once in two years
Q62: An open ended fund can change its fundamental attributes by
Answer
Answer: Allowing investors to exit at NAV without a load
Q63: Apex regulatory body for insurance sector is
Answer
Answer: IRDA
Q64: are analysts who use information concerning current and prospective
Answer
Answer: Credit analysts
Q65: Assest Securitization is
Answer
Answer: Provide adequate collateral security to bank prior to raising loans
Q66: Asset Liability Management for the banks involves
Answer
Answer: It is a kind of risk management technique adopted by banks
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
Answer: 0.04%
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
Answer: About .3977 Canadian dollars
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
Answer: 4.927
Q70: At the end of the year, goods that are unsold are deducted from
Answer
Answer: Cost of goods sold
Q71: Average collection period is equal to
Answer
Answer: 360/ Receivables Turnover Ratio
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
Answer: Revolving credit agreement
Q73: A___forbids the future pledging or mortgaging of any of the borrower’s assets
Answer
Answer: Negative pledge clause
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
Answer: Medium-term note
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
Answer: Commitment fee
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
Answer: Term loan
Q77: A___is not a relevant cost for the project decision
Answer
Answer: Sunk cost
Q78: A___represents any restriction imposed on a borrower by a lender and would be part of the loan agreement
Answer
Answer: Covenant
Q79: A___specifies all of the terms of a loan and the obligations of the borrower
Answer
Answer: Loan agreement
Q80: Bad debt cost is not borne by factor in case of
Answer
Answer: Pure factoring
Q81: Balanced funds provide
Answer
Answer: Steady return
Q82: Bank Assurance refers to which of the following
Answer
Answer: A tie up between insurance and bank whereby the insurance company can use the sales channel of the bank
Q83: Banks are important to the study of money and the economy because they
Answer
Answer: Provide a channel for linking those who want to save with those who want to invest
Q84: Banks create money when they
Answer
Answer: expand loans and buy securities
Q85: Banks, savings and loan associations, mutual savings banks, and credit unions
Answer
Answer: Have been providing services only to small depositors since deregulation
Q86: Basic determinant of Foreign Capital inflow are
Answer
Answer: All these—Imbalances in savings and investments leading to current account gaps
Legal and Institutional Structure
Expected rate of return
Q87: Basic objective of a money market mutual fund is
Answer
Answer: None of a and b—a. Guaranteed rate of return
b. Investment in short – term securities
Q88: Bridge Finance is meant for
Answer
Answer: Short term financing
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
Answer: None of These—90%
10%
9%
0.9% [*It should be 81% [formula = (1- payout ratio) x ROE]
Q90: C.R.A. is banking parlance stands for
Answer
Answer: Credit Rating Agency
Q91: Call money market
Answer
Answer: All These—Trades in surplus funds of the banks
Deals in commercial paper
Helps in maintenance of statutory liquidity ratio
Q92: Capital Adequacy refers to which of the following
Answer
Answer: It is the total capital of the bank
Q93: Capital Budgeting is a part of
Answer
Answer: Investment Decision
Q94: Capital Budgeting means
Answer
Answer: Financing of the capital for investments in the long term Fixed assets
Q95: Capital gains taxes are imposed on
Answer
Answer: due to change in prices
Q96: Capital intensive industries require___amount of working capital
Answer
Answer: None of these—Lower
Medium
Higher
Q97: Capital structure of a firm means
Answer
Answer: The proportion of Debt and equity
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
Answer: 1.25
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
Answer: Conversion of cash credit into overdraft
Q100: Changes in stock prices
Answer
Answer: All These—(a) Affect people’s wealth and their willingness to spend
(b) Affect firm’s decisions to sell stock to finance investment spending.
(c) Are characterized by considerable fluctuations
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