Q1: Collectively, reserves, cash items in process of collection, and deposits at other banks, are referred to as___in a bank balance sheet
Answer: cash itemsAnswer
Q2: Commercial banks obtain funds by
Answer: All these—issuing demand depositsAnswer
borrowing from other banks
issuing ownership claims (equity)
Q3: Compared to interest rates on long-term U.S. government bonds, interest rates on three-month Treasury bills fluctuates___and are___on average
Answer: less; higherAnswer
Q4: Compounding technique is
Answer: exactly opposite of discounting techniqueAnswer
Q5: Compounding technique shows
Answer: Future ValueAnswer
Q6: Consider the following data for a company: Interest burden (I) = Rs. 1,50,000
Tax Rate (T) = 50%
Preference Dividend (Dp) = Rs. 75,000
When the earnings before interest and taxes (EBIT) are Rs. 5,00,000, the degree of Financial Leverage is
Answer: 2.5Answer
Q7: Corporate shareholders are best protected from incompetent management decisions by
Answer: The threat of takeover by other firmsAnswer
Q8: Cost of Capital refers to
Answer: Required Rate of ReturnAnswer
Q9: Cost of equity capital is
Answer: Equal to the discounting factor which equates the net amount realized from the issue to the future dividend paymentAnswer
Q10: Cost of equity share capital is
Answer: equal to rate of discount at which expected dividends are discounted to determine their PVAnswer
Q11: Cost of Equity Share Capital is more than cost of debt because
Answer: Equity shares have higher risk than debtAnswer
Q12: Credit cards
Answer: Enables a card member to pay just the minimum amount due from him to the bank at any point of timeAnswer
Q13: Credit rating agencies
Answer: evaluate credit worthiness of a companyAnswer
Q14: Credit Risk refers to the risk of
Answer: Risk of non payment from the tax credits to RBIAnswer
Q15: CRR stands for
Answer: Cash reserve ratioAnswer
Q16: Current assets – Current liabilities =
Answer: Net working capitalAnswer
Q17: Current Assets minus current liabilities is equal to
Answer: Net working capitalAnswer
Q18: Current ratio indicates
Answer: Capacity to meet current liabilitiesAnswer
Q19: Current yield on a bond is
Answer: All These—Measured as the rate of return that will be earned on a bond if it is purchased at its current market price and coupon interest is receivedAnswer
Coupon interest divided by previous market price
Equal to coupon rate if and only if the bond’s market price is greater than its face value
Q20: Debt securities with less than 182 days to maturity are valued at
Answer: Accrual basisAnswer
Q21: Debt/Income funds invest in
Answer: High Rate fixed income bearing instrumentsAnswer
Q22: Degree of financial leverage is___below the financial break even point
Answer: NegativeAnswer
Q23: Degree of the total leverage (DTL) can be calculated by the following formula [Given degree of operating leverage (DOL) and degree of financial leverage (DFL)]
Answer: DOL x DFLAnswer
Q24: Degree of total leverage (DTL) can be calculated by which of the following formulae, given Degree of Operating Leverage(DOL) and Degree of Financial Leverage(DFL)
Answer: DOL x DFLAnswer
Q25: Discounting techniques in capital budgeting include
Answer: None of these—NPVAnswer
Profitability Index
Pay back period
Q26: Diversifiable risk is
Answer: unsystematic riskAnswer
Q27: Dividend Payout Ratio is
Answer: DPS / EPSAnswer
Q28: Each of two stocks, A and B, are expected to pay a dividend of USD5 in the upcoming year. The expected growth rate of dividends is 10% for both stocks. You require a rate of return of 11% on stock A and a return of 20% on stock B. The intrinsic value of stock A___
Answer: will be greater than the intrinsic value of stock BAnswer
Q29: Earning per share
Answer: refers to earnings of equity shareholders after all other obligations of the company have been metAnswer
Q30: Earnings per share
Answer: Refers to the earnings of equity shareholders after all the other obligations of the company have been metAnswer
Q31: Economists group commercial banks, savings and loan associations, credit unions, mutual funds, mutual savings banks, insurance companies, pension funds, and finance companies together under the heading financial intermediaries. Financial intermediaries
Answer: All These—(a) Act as middlemen, borrowing funds from those who have saved and lending these funds to others.Answer
(b) Play an important role in determining the quantity of money in the economy.
(c) Help promote a more efficient and dynamic economy
Q32: Effect of a project on the working of other parts of a firm is known as___
Answer: ExternalitiesAnswer
Q33: Efforts Ltd negotiated a lease on the following terms: the term of the lease was 5 years; the estimated useful life of the leased equipment was 10 years; the purchase price was USD 60,000; and the annual lease payment was USD 5,000. This lease should be classified as
Answer: An Operating LeaseAnswer
Q34: EPS is
Answer: Earnings per shareAnswer
Q35: Equity shares of a company are quoted in the market at Rs 17.00. The dividend expected a year hence is Re 1.00. The expected rate of dividend growth is 8%. The cost of equity capital to the company will be
Answer: 0.14%Answer
Q36: Ex-Marks of an equity fund measures its
Answer: RiskAnswer
Q37: Examining and defining the mathematical relation between the variable of the NPV is one of the steps of___
Answer: Sensitivity analysisAnswer
Q38: Excess of sales over cost of goods sold in an accounting period is termed as
Answer: Gross ProfitAnswer
Q39: Factoring is
Answer: helpful in business for working capital managementAnswer
Q40: Financial assets___
Answer: Indirectly contribute to the country’s productive capacityAnswer
Q41: Financial Institutions are not be regulated by
Answer: SEBIAnswer
Q42: Financial instruments issued by government agencies or corporations that promise to pay certain amounts of money to the holder on specific future dates are called
Answer: bondsAnswer
Q43: Financial intermediaries
Answer: channel funds from savers to borrowersAnswer
Q44: Financial intermediaries promote efficiency and thereby increase people’s wealth
Answer: because of only (a) and (b)— a) by reducing the transaction cost of linking together lender and borrowersAnswer
b) to the extent that they help solve problems created by adverse selection and moral hazard
Q45: Financial markets and institutions
Answer: All of these—involve the movement of huge quantities of moneyAnswer
affect the profits of businesses
affect the types of goods and services produced in an economy
Q46: Financial Planning deals with
Answer: All These—Preparation of Financial StatementsAnswer
Planning for a Capital Issue
Preparing Budgets
Q47: Financial planning is
Answer: Process of solving financial problems and reaching financial goalsAnswer
Q48: Find the present value of Rs.1,00,000 receivable after 10 yrs.if 10% is time preference for money
Answer: 38600Answer
Q49: Firms that specialize in helping companies raise capital by selling securities are called
Answer: Investment BanksAnswer
Q50: Fiscal Policy of the Government is
Answer: with respect to revenue and expenditureAnswer
Q51: Flexible exchange rates insulates the economy better than fixed exchange rates
Answer: against real and domestic monetary shocksAnswer
Q52: For a company subject to the alternative minimum tax (AMT),___is a “tax preference item,” whereas___is not. Such a company may prefer to___
Answer: Accelerated Depreciation; A Lease Payment; LeaseAnswer
Q53: For a lessor, a lease is a
Answer: Investment decisionAnswer
Q54: For a project to be viable , the Net present value of the project should be
Answer: PositiveAnswer
Q55: For determining the value of a share on the basis of P/E ratio, information is required regarding
Answer: earning per shareAnswer
Q56: Forecasts under Sensitivity analysis are made under different___
Answer: Economic conditionsAnswer
Q57: Foreign exchange market in India has
Answer: Floating rate systemAnswer
Q58: Formulating is the third step in the evaluation of investment proposal
Answer: YesAnswer
Q59: Forward contracts
Answer: contain a commitment to the owner, and can be tailored to the desire of the ownerAnswer
Q60: From the point of view of the lessee, a lease is a
Answer: Financial decisionAnswer
Q61: Funds do not have a fixed date of redemption
Answer: Open ended fundsAnswer
Q62: Gilt funds invest in
Answer: Government bondsAnswer
Q63: Given an investment of Rs. 1,000 to be invested for 9 months and interest is credited annually
Answer: It is better to invest in a scheme which earns simple interest at 15%Answer
Q64: High P/E ratios tend to indicate that a company will___, ceteris paribus
Answer: grow slowlyAnswer
Q65: High Speed Company has an expected ROE of 15%. The dividend growth rate will be___if the firm follows a policy of paying 50% of earnings in the form of dividends
Answer: 0.07%Answer
Q66: Higher operating leverage is related to the use of additional___
Answer: Fixed costsAnswer
Q67: Highly liquid security is
Answer: Treasury billsAnswer
Q68: Historically, P/E ratios have tended to be
Answer: lower when inflation has been highAnswer
Q69: How are funds allocated efficiently in a market economy
Answer: The economic unit that is willing to pay the highest expected return receives the fundsAnswer
Q70: Identify the controllable risk
Answer: Labour problemAnswer
Q71: If a 8% bond with face value of Rs. 1,000 is selling for Rs. 1,100 what is the current yield
Answer: 0.07%Answer
Q72: If a borrower promises to pay Rs.20000 eight years from now in return for a loan of Rs.12550 today, what is the annual interest being offered
Answer: 6% approxAnswer
Q73: If a company sells its receivable to another party to raise funds, it is known as
Answer: FactoringAnswer
Q74: If a fund’s NAV is Rs. 12, what is the maximum sale price it can charge, according to SEBI regulations
Answer: Rs. 12.84Answer
Q75: If a scheme holds more than 15% in illiquid securities, all securities above that limit have to
Answer: Assigned a value of zeroAnswer
Q76: If an AMC does not resolve in investor’s complaint, investor can appeal to
Answer: SEBIAnswer
Q77: If net working capital is negative, it signifies that
Answer: All These—The liquidity position is not comfortableAnswer
The current ratio is less then 1
Long term uses are met out of short- term sources
Q78: If Rs300 is invested now, Rs500 two years from now, and Rs700 four years from now at an interest rate of 3% compounded annually, what will be the total amount in 10 years
Answer: F = Rs 1,872.40Answer
Q79: If Sure’s intrinsic value is USD21.00 today, what must be its growth rate
Answer: 0%Answer
Q80: If the cut off rate of a project is greater than IRR, we may
Answer: reject the proposalAnswer
Q81: If the dollar moves from 100 yen to 110 yen, then
Answer: None of these —a) a the dollar has depreciatedAnswer
b) the yen has appreciated
Q82: If the expected ROE on reinvested earnings is equal to k, the multistage DDM reduces to
Answer: V0 = (Expected EPS in Year 1)/kAnswer
Q83: If the Federal Reserve wants the dollar to appreciate, it will likely adopt a
Answer: contractionary monetary policyAnswer
Q84: If the Federal Reserve wants to inject reserves into the banking system, it will usually
Answer: purchase government securitiesAnswer
Q85: If the interest rate on dollar deposits is 10 percent, and the dollar is expected to appreciate by seven percent over the coming year, then the expected return on the dollar deposit in terms of foreign currency is
Answer: 0%Answer
Q86: If the interest rate on dollar-denominated assets is 10% and it is 8% on euro-denominated assets, then if the euro is expected to appreciate at a 5% rate
Answer: The expected return on euro-denominated assets in dollars is 3%Answer
Q87: If you deposit Rs.10,000 today in a bank that offers 8% interest, in how many years will this amount double by 72 rule
Answer: 9Answer
Q88: If you invest USD10,000 today for a period of 5 years, what will be the maturity value if the interest rate is
Answer: Note: Incomplete QuestionsAnswer
Q89: If you maintain a flexible asset allocation you would
Answer: Generally avoid portfolio re-balancingAnswer
Q90: Illiquid securities in a portfolio
Answer: All These—a. Cannot be transferred across schemesAnswer
b. Cannot be more than 15% of net assets
Q91: Important trends changing the contemporary investment environment are
Answer: All These—a. GlobalizationAnswer
b. Securitization
c. Information and computer networks.
d. Financial engineering.
Q92: In a capital budgeting decision, incremental cash flow mean
Answer: difference between cash inflows and outflows for each and every expenditureAnswer
Q93: In capital budgeting, when money is coming in the firm, it is called*
Answer: Cash inflowAnswer
Q94: In capital budgeting, when money is going out of the firm, it is called*
Answer: Cash outflowAnswer
Q95: In case the firm is all-equity financed, WACC would be equal to
Answer: Cost of EquityAnswer
Q96: In general, when speculating on exchange rate movements, the speculator will borrow the currency that is expected to appreciate and invest in the country whose currency is expected to depreciate
Answer: Wrong – FalseAnswer
Q97: In IRR, the cash flows are assumed to be reinvested in the project at
Answer: risk free rateAnswer
Q98: In lease system, interest rate is calculated on
Answer: Cash price OutstandingAnswer
Q99: In order to find the value in 1995 of a sum of USD 100 invested in 1993 at X% interest
Answer: b. The PVIFA table should be usedAnswer
Q100: In order to find the value in 2000 of Rs 100 invested in 1998 at X% interest rate
Answer: The FVIF table should be usedAnswer
