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Q1: In the long run, a successful acquisition is one that 

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Answer: increases financial leverage

Q2: In the long run, the U.S. dollar appreciates if 

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Answer: U.S. prices fall and the U.S. increases tariffs on imports

Q3: In the short run model of exchange rate determination, if we consider the U.S. European exchange rate (euros per dollar), if the European Central Bank unexpectedly boosts interest rates, then this will cause the 

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Answer: dollar to appreciate

Q4: Insurance companies are regulated by which institution 

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Answer: IRDA

Q5: Interest rates in India during the year 2001 have 

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Answer: gone down

Q6: Interest-rate parity refers to the concept that, where market imperfections are few 

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Answer: Interest rates across countries will eventually be the same

Q7: International Finance is 

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Answer: different from domestic finance

Q8: Investing in interest-bearing instruments in foreign exchange and earning a profit due to interest rate and exchange rate differentials is 

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Answer: Interest arbitrage

Q9: Investment bankers perform the following role(s___ 

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Answer: All These—a. Market new stock and bond issues for firms b. Provide advice to the firms as to market conditions, price, etcc. Design securities with desirable properties

Q10: Investor invest more in stock during their 

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Answer: mid career level

Q11: IRR gives a rate of return that reflects the___of the project 

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Answer: Profitability

Q12: is equal to (common shareholders’ equity/common shares outstanding) 

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Answer: Book value per share

Q13: is the amount of money per common share that could be realized by breaking up the firm, selling the assets, repaying the debt, and distributing the remainder to shareholders 

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Answer: Liquidation value per share

Q14: Lease which includes a third party (a lender) is known as 

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Answer: Inverse Lease

Q15: Light Construction Machinery Company has an expected ROE of 11%. The dividend growth rate will be___if the firm follows a policy of paying 25% of earnings in the form of dividends 

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Answer: 0.08%

Q16: Liquidity ratio computed by eliminating inventories from current assets is 

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Answer: Quick ratio

Q17: Loans made by the Federal Reserve to depository institutions are in the form of 

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Answer: reserves

Q18: Longer the manufacturing cycle___the investment in working capital 

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Answer: Larger

Q19: Low Tech Company has an expected ROE of 10%. The dividend growth rate will be___if the firm follows a policy of paying 40% of earnings in the form of dividends 

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Answer: 0.06%

Q20: Market price of equity share of a company is Rs. 25 and the dividend expected a year hence is Rs. 10. The expected rate of dividend growth is 5%. The cost of equal capital to company will be 

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Answer: 0%

Q21: Market-determined exchange rates are best represented by a system of 

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Answer: floating exchange rates

Q22: Maximum duration of a treasury bill can be 

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Answer: 365 days

Q23: Medtronic Company has an expected ROE of 16%. The dividend growth rate will be___if the firm follows a policy of paying 70% of earnings in the form of dividends 

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Answer: 0.05%

Q24: Members of the Board of Governors of the Federal Reserve System obtain their positions through 

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Answer: appointment by the U.S. President and approval by the Senate

Q25: Money has time value because 

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Answer: d. Both (a) and (b) above.

Q26: Money has time value since 

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Answer: All These—Money in hand today is more certain than money to be got tomorrowThe value of money gets discounted as time goes by

Q27: Money is defined as 

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Answer: All These—(a) Anything that is generally accepted in payment for goods and services or in the repayment of debt(b) Bills of exchange(c) A risk less repository of spending power

Q28: Mutual funds are described as___in the SEBI Regulations, 1996 

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Answer: Trusts

Q29: Mutual funds are valued with help of their 

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Answer: NAV’s

Q30: Mutual funds can borrow 

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Answer: Both b and c

Q31: Mutual funds can lend funds in the form of 

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Answer: Securities

Q32: Mutual Funds investor can not earn following return 

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Answer: Fixed interest earning

Q33: Mutual Funds provide the benefits of 

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Answer: All these—a. Portfolio managementb. Diversificationc. Investment Avenues

Q34: Mutual funds should be recommended as 

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Answer: Investments to achieve long term goals

Q35: Mutual funds that charge a sales commission when shares are purchases are called 

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Answer: Loaded funds

Q36: Narsimhan Committee recommendations were in relation to which of the following institutions 

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Answer: Banks

Q37: NBFC offer higher rate of interest because of 

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Answer: the risk involved

Q38: Negative networking capital signifies that 

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Answer: All These—The value of current ratio is less than unityShort term funds are diverted for long term purposes

Q39: Net profit is equal to 

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Answer: Both (a) and (b)

Q40: Net Profit Ratio Signifies 

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Answer: Operational Profitability

Q41: Net working capital is 

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Answer: excess of gross current assets over current liabilities

Q42: Net working capital refers to 

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Answer: Current assets minus current liabilities

Q43: NOI Approach advocates that the degree of debt financing is 

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Answer: Irrelevant

Q44: NPA in the context of banking sector stand for 

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Answer: Non performing assets

Q45: Of what is sinking fund an example of 

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Answer: Annuity

Q46: Of which of the following basis can a funds flow statement prepared 

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Answer: All These—Total resource basisWorking capital basisCash basis

Q47: On the commercial bank balance sheet, which of the following is an asset 

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Answer: deposits with Federal Reserve

Q48: One difference between Operating and Finance lease is 

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Answer: There is often a call option in financial lease

Q49: One large company that holds many different banks as subsidiaries is called a (an) 

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Answer: bank holding company

Q50: One means for a company to “go private” is 

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Answer: the leveraged buyout (LBO)

Q51: One of the following, what is not true in respect of factoring 

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Answer: Factor provides cost free finance to seller

Q52: One of the problems with attempting to forecast stock market values is that 

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Answer: the level of uncertainty surrounding the forecast will always be quite high

Q53: Open market operations are of two types 

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Answer: dynamic and defensive

Q54: Open Market Operations have an objective of 

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Answer: management of monetary policy

Q55: Operating cycle approach is based on the assumption that production and sales occur on___ 

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Answer: Continuous basis

Q56: Operating cycle can be delayed by 

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Answer: All These—Increase in WIP periodDecrease in credit payment period

Q57: Operating leases usually have terms that include 

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Answer: Only answers ‘a’. and ‘c.’ above

Q58: Operating leverage measures the sensitivity of the___to changes in quantity 

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Answer: Earnings before interest and tax

Q59: Options and Futures trading in India was started in the Year 

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Answer: 2000

Q60: P/E of which of these stocks is usually high 

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Answer: Growth stocks

Q61: P/E Ratio means 

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Answer: market price is to EPS ratio (price earning ratio)

Q62: Payback period___tine value of money 

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Answer: Ignores

Q63: Post completion audit is___in the phases of capital budgeting decisions 

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Answer: Last step

Q64: Power within the Federal Reserve is essentially located in 

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Answer: Washington, D.C

Q65: Primary Market refers to 

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Answer: A subset of money market, where the government issues new T-bills

Q66: Prime duty of merchant banker is 

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Answer: None of these—Maintaining records of clientsGiving loans to clientsWorking as a capital market intermediary

Q67: Prudential norms relate to which of the following 

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Answer: Norms related to Management of bank funds in a systematic manner

Q68: Punjab National Bank Mumbai Branch quoted USD 1= Rs 50.5000/52.5050. Which is the bid rate for USD 

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Answer: 50.5

Q69: Purchasing-power parity (PPP) refers to___ 

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Answer: the concept that the same goods should sell for the same price across countries after exchange rates are taken into account

Q70: RBI allowed general public to purchase government securities at 

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Answer: Minimum price

Q71: Registrar to the issue 

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Answer: recommends the basis of allotment

Q72: Reinsurance refers to which of the following 

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Answer: Insurance taken on something which is already insured

Q73: Retained earnings are 

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Answer: An indication of a company’s liquidityAndearnings of a company that are not paid out to stockholders

Q74: Retired investors should 

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Answer: Not invest in securities which bear risk of capital erosion

Q75: Risk in Capital budgeting implies that the decision-maker knows___of the cash flows 

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Answer: Probability

Q76: Risk- Return trade off implies 

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Answer: taking decisions in a way which optimizes the balance between risk and return

Q77: Risk-return trade-off implies 

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Answer: Taking decisions in a way which optimizes the balance between risk and return

Q78: SEBI would not vet offer documents seeking listing on 

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Answer: OTCEI

Q79: Secondary Market refers to 

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Answer: A subset of the capital market, where the equities are traded

Q80: Share prices 

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Answer: the increasing or decreasing move be zigzag

Q81: Since 1955, Treasury bond yields and earnings yields on stocks were___ 

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Answer: positively correlated

Q82: SLR stands for 

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Answer: Statutory liquidity ratio

Q83: Stock exchange can act as regulators of 

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Answer: Closed end funds listed on the exchange

Q84: Suppose that purchasing power parity holds, and that the current exchange rate between the dollar and the yen is 110 yen/USD. If inflation in the U.S. runs at 4 percent and inflation in Japan runs at 2 percent, next year we would expect the exchange rate to be roughly 

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Answer: 108 yen/USD

Q85: Suppose that the Japanese yen is selling at a forward discount in the forward-exchange market. This implies that most likely 

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Answer: Interest rates are higher in Japan than in the United States

Q86: Suppose that the market price of Company X is USD45 per share and that of Company Y is USD30. If X offers three-fourths a share of common stock for each share of Y, the ratio of exchange of market prices would be 

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Answer: 1.125

Q87: Tandon committee suggested inventory and receivable norms for 

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Answer: 25 major and minor industries

Q88: Term Insurance is 

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Answer: A pure life insurance risk plan

Q89: The accounting statement of cash flows reports a firm’s cash flows segregated into what categorical order 

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Answer: Operating, investing, and financing

Q90: The amount of current assets required to meet a firm’s long-term minimum needs is referred to as___working capital 

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Answer: permanent

Q91: The bond markets are important because 

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Answer: They are the markets where interest rates are determined

Q92: The capital structure ratio measure the 

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Answer: Financial Risk

Q93: The Combined Leverage gives the relationship between 

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Answer: Sales Revenue and EPS of the firm

Q94: The cost of Debt is always calculated 

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Answer: After tax

Q95: The cost of equity takes into account the 

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Answer: all the above

Q96: The cost of Retained Earnings is same as 

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Answer: Cost of Equity

Q97: The costliest of long term sources of finance is 

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Answer: Equity share capital

Q98: The credit term offered by a supplier is 3/10 net 60.The annualized interest cost of not availing the cash discount is 

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Answer: 0.23%

Q99: The demand for the monetary base is composed of demand by 

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Answer: banks and the public

Q100: The difference between a capital market and money market is that 

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Answer: All These—Capital markets can be classified into primary and secondary markets unlike money marketCapital market provides the resources needed by medium and large scale industries for investment purposes while money market provides resources for working capital needs
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