81. Which of the following statements is false?
A. A bond issuer must pay periodic interest.
B. Bond prices remain fixed over time.
C. Bonds carry no corporate ownership privileges.
D. A bond is a financial contract.
Answer
B. Bond prices remain fixed over time.
82. Which of the following statements is true?
A. Low inflation is expected to have a negative effect on bond prices.
B. Generally speaking, bonds are riskier than common stocks.
C. Bonds are usually less liquid than stocks.
D. A bondholder repays principal when the bond matures.
Answer
C. Bonds are usually less liquid than stocks.
83. Most bonds:
A. are money market securities.
B. give bondholders a voice in the affairs of the corporation.
C. are interest-bearing obligations of governments or corporations.
D. are floating-rate securities.
Answer
C. are interest-bearing obligations of governments or corporations.
84. Which of the following is not an advantage of investing in bonds?
A. Bonds have unlimited profit potential.
B. Bond investments are relatively safe from large losses.
C. Bonds are good sources of current income.
D. Bondholders receive their payments before shareholders can be compensated.
Answer
A. Bonds have unlimited profit potential.
85. Which of the following is a capital market security?
A. Treasury bills.
B. Federal funds.
C. Federal agency bonds.
D. Eurodollars.
Answer
C. Federal agency bonds.
86. Which of the following is a money market security?
A. Repurchase agreements.
B. Municipal bonds.
C. Mortgages.
D. U.S. Treasury notes.
Answer
A. Repurchase agreements.
87. Corporations borrow for the short term by issuing:
A. corporate bills.
B. corporate bonds.
C. commercial paper.
D. bankers’ acceptances.
Answer
C. commercial paper.
88. What is used to quote the rates on Eurodollar deposits?
A. Discount rate.
B. Federal funds rate.
C. Repo rate.
D. LIBOR.
Answer
D. LIBOR.
89. Which of the following provides income that is fully exempt from taxation for the individualinvestor?
A. Municipal bonds.
B. Preferred stocks.
C. Treasury notes.
D. Treasury bills.
Answer
A. Municipal bonds.
90. Which of the following is a residual claim on a firm’s assets?
A. Preferred stock.
B. Common stock.
C. Preference shares.
D. Participating preferred stock.
Answer
B. Common stock.
91. Which of the following occurs four trading days before the date of record?
A. Distribution date.
B. Payment date.
C. Declaration date.
D. Ex-dividend date.
Answer
D. Ex-dividend date.
92. Which of the following types of assets is least risky?
A. Short-term corporate bonds
B. Long-term corporate bonds.
C. Stocks.
D. Options and futures.
Answer
A. Short-term corporate bonds
93. Which of the following types of assets offers the highest expected return?
A. Stocks.
B. Long-term government bonds.
C. Options and futures.
D. Long-term corporate bonds.
Answer
A. Stocks.
94. Which of the following types of financial assets represents a creditor relationship with anentity?
A. Stocks.
B. Options.
C. Futures.
D. Bonds.
Answer
D. Bonds.
95. Which of the following sequences lists financial assets from least risky to most risky?
A. Stocks, bonds, derivatives.
B. Bonds, derivatives, stocks.
C. Derivatives, bonds, stocks.
D. Bonds, stocks, derivatives.
Answer
D. Bonds, stocks, derivatives.
96. Which of the following sequences lists financial assets from lowest expected return tohighest expected return?
A. Bonds, stocks, derivatives.
B. Bonds, derivatives, stocks.
C. Stocks, bonds, derivatives.
D. Derivatives, stocks, bonds.
Answer
A. Bonds, stocks, derivatives.
97. Which of the following types of assets represents ownership interest in a corporation?
A. Bonds
B. Stocks.
C. Futures.
D. Options.
Answer
B. Stocks.
98. Financial assets are also called:
A. securities.
B. real assets.
C. tangible assets.
D. physical assets.
Answer
A. securities.
99. If people are willing to lend at 7% when inflation is 2% and continue to lend the sameamounts when inflation is 4% and interest rates have risen to 8%, they are assumed to be subject to:
A. Extrapolative expectations
B. Risk aversion
C. Asymmetric information
D. Money illusion
Answer
D. Money illusion
100. The reason that finding the present value of a future sum of money requires us to discountit, is that:
A. Inflation will reduce its purchasing power
B. We can’t be certain of receiving it
C. We don’t know when we shall receive it
D. Waiting deprives us of its use
Answer
D. Waiting deprives us of its use
101. If interest rates rise, the present value of any future earnings is bound to:
A. Fall
B. Rise
C. Suffer from inflation
D. Increase in risk
Answer
A. Fall
102. In the loanable fund’s theory of interest determination, an increase in the productivity ofcapital equipment should lead to:
A. A reduction in the amount of saving
B. More employment
C. Higher interest rates
D. Higher prices
Answer
C. Higher interest rates
103. If savers decide to save more, ceteris paribus, the loanable funds theory predicts:
A. A reduction in investment and interest rates
B. An increase in investment and interest rates
C. Higher economic growth
D. A reduction in interest rates and more investment
Answer
D. A reduction in interest rates and more investment
104. According to the Fisher hypothesis, the nominal rate of interest consists of:
A. A stable real rate plus a variable risk premium
B. A real rate plus a liquidity premium plus a risk premium
C. A stable real rate plus a variable inflation premium
D. An inflation premium plus a liquidity premium
Answer
C. A stable real rate plus a variable inflation premium
105. According to the liquidity preference theory of interest, an increase in uncertainty, otherthings being equal, will:
A. Decrease output and employment
B. Increase risk aversion
C. Reduce the demand for money
D. Raise interest rates
Answer
D. Raise interest rates
106. The ability of central banks to influence short-term interest rates rests upon:
A. Government policy
B. Their role as lenders of last resort
C. Their supervisory role
D. Sales of government bonds
Answer
B. Their role as lenders of last resort
107. A central bank which sets the short-term rate of interest must:
A. Buy treasury bills
B. Meet the resulting demand for reserves
C. Sell government bonds
D. Change the reserve ratios
Answer
B. Meet the resulting demand for reserves
108. According to ___ theory of interest, the rate of Interest is the price of credit which isdetermined by the demand and supply for loanable funds.
A. Loanable Fund theory
B. Productivity theory
C. Abstinence theory
D. None of these
Answer
A. Loanable Fund theory
109. According to ___ theory interest arises on account of the productivity of capital.
A. Loanable Fund theory
B. Productivity theory
C. Abstinence theory
D. Classical theory
Answer
B. Productivity theory
110. The Time- Preference Theory of Interest was expounded by ___
A. John Rae
B. Alfred Marshall
C. JM Keynes
D. JB Clark
Answer
A. John Rae
111. ___ defined Interest as “an index of the community’s preference for a dollar ofpresent over a dollar of future income.”
A. Fisher
B. Alfred Marshall
C. JM Keynes
D. JB Clark
Answer
A. Fisher
112. According to ___ theory, Interest is the reward for the productive use of the capital which is equal to the marginal productivity of physical capital.
A. Loanable Fund theory
B. Productivity theory
C. Abstinence theory
D. Classical theory
Answer
D. Classical theory
113. Loanable Fund theory is also known as ___
A. Classical theory
B. Neo-classical theory
C. Demand and Supply theory
D. Productivity theory
Answer
B. Neo-classical theory
114. Neo- Classical theory of interest was expounded by ___
A. Prof. Fisher
B. Alfred Marshall
C. Knot Wicksel
D. JB Clark
Answer
C. Knot Wicksel
115. According to Keynes, Interest is purely a ‘monetary phenomenon’.
A. Fisher
B. Alfred Marshall
C. JM Keynes
D. JB Clark
Answer
C. JM Keynes
116. Who propounded liquidity preference theory of interest?
A. Prof.Fisher
B. Alfred Marshall
C. JM Keynes
D. JB Clark
Answer
C. JM Keynes
117. ___ is called as “Real Theory of Interest”
A. Classical theory
B. Neo-classical theory
C. Demand and Supply theory
D. Productivity theory
Answer
A. Classical theory
118. Technical consultancy Organisations were set up by ___.
A. IFCI
B. IDBI
C. RBI
D. SEBI
Answer
B. IDBI
119. ICICI was set up in ___.
A. 1955
B. 1964
C. 1989
D. 1935
Answer
A. 1955
120. ___. assists mainly to industrial undertakings in the private sector
A. IFCI
B. IDBI
C. ICICI
D. SEBI
Answer
C. ICICI
