MBOF912D-Financial Management-Jul19-Assignment2

Total Questions: 56
Total Marks: 100

Assignment Information :

The examination will consist of only Objective type (multiple choice) questions
requiring candidates to Mouse-click their correct choice of alternatives against the
related question number. The questions would carry 1 to 5 marks each depending on
the difficulty level of the question as indicated in the table below:

Difficulty Level of Questions:

1 Mark - Direct, Memory based

2 Marks - Memory & Conceptual
3 Marks - Conceptual & Analytical
4 Marks - Analytical based on understanding of concepts
5 Marks - Application based on understanding of concepts
  The question paper will be for 100 marks and considering marks
allotted to each question, the total number of questions would be around
63.
  There will not be negative marking for wrong answers.
  In case candidate does not want to attempt the question he I she
should not mouse-click any option.
  The students are allowed to save the responses and come back
later to resume, complete and "Save and Submit" the assignment.
However, if the Due Date has expired, then the assignment will not be
accessible and will be marked as zero. In such cases, the student can re-
attempt the assignment allocated after enrolling in the subsequent
Semester.
  Once submitted, that answer sheet cannot be retreieved for any
editing. The student has to initiate a new attempt (if allowed), if he has
submitted the assignment by mistake.
  The students are normally allowed 3 chances to attempt and
submit the assignment. The number of attempts availed is displayed under
the "Test Information".
  The Highest Grade of the 3 attempts shall be considered for
grading.
  The assignments are auto evaluated, and hence no chance of re-
evaluation/re-totalling is allowed to the student.
Multiple Attempts This Test allows
3 attempts.
This is attempt
number 1.
Force Completion This Test can
be saved and
resumed later.
 Question Completion Status:
QUESTION 1
1. The most basic requirement for a firm's marketable securities is yield.

 True
 MBOF912D-Financial Management-Jul19-Assignment2
 False

2 points   
QUESTION 2
1. Which of the following is not incorporated in Capital Budgeting?
Tax-Effect
Time Value of
Money
Required Rate of
Return
Rate of Cash
Discount
2 points   
QUESTION 3
1. (I) The primary issuers of capital market securities are financial
institutions. (II) The largest purchasers of capital market securities are
corporations.
(I) is true, (II)
false.
(I) is false, (II)
true.
Both are true.
Both are false

2 points   
QUESTION 4
1. Financial leverage depends upon the operating leverage.

 True

 False

2 points   
QUESTION 5
1. Return includes only the interest or dividend received from an
investment.

 True

 False

2 points   
QUESTION 6
1. An annual percentage rate (APR) is determined by annualizing the rate
using compound interest.
 MBOF912D-Financial Management-Jul19-Assignment2
 True

 False

2 points   
QUESTION 7
1. In Certainty Equivalent Approach, the CE Factors for different years
are:
Generally
increasing
Generally
decreasing
Generally same
All of the above

2 points   
QUESTION 8
1. If interest expenses for a firm rise, we know that firm has taken on
more ______________.
financial
leverage
operating
leverage
fixed assets
none of the
above
2 points   
QUESTION 9
1. An aggressive share would have a beta greater than one.

 True

 False

2 points   
QUESTION 10
1. In Risk-Adjusted Discount Rate method, the normal rate of discount is:
Increase
d
Decreas
ed
Unchang
ed
 MBOF912D-Financial Management-Jul19-Assignment2
2 points   
QUESTION 11
1. If no information is available, the General Rule for value degree ation
of stock for balance sheet is
Replacement
Cost
Realizable
Value
Historical Cost
Standard Cost

2 points   
QUESTION 12
1. Assuming a project has the same risk and financing as the firm, it will
have a positive NPV if its rate of return is greater than the firm's WACC.

 True

 False

2 points   
QUESTION 13
1. Financial leverage depends upon the fixed financial charges.

 True

 False

2 points   
QUESTION 14
1. If cash discount is offered to customers, then which of the following
would increase?
Sales
Debtors
Debt collection
period
All of the above

2 points   
QUESTION 15
1. To sell an old bond when interest rates have risen, the holder will have
to discount the bond until the yield to the buyer is the same as the market
rate.

 True
 MBOF912D-Financial Management-Jul19-Assignment2
 False

2 points   
QUESTION 16
1. If the firm decreases its debt ratio, both the debt and the equity will
become more risky. The debtholders and equityholders require a higher return
to compensate for the increased risk.

 True

 False

2 points   
QUESTION 17
1. You are planning to retire in twenty years. You'll live ten years after
retirement. You want to be able to draw out of your savings at the rate of
$10,000 per year. How much would you have to pay in equal annual deposits
until retirement to meet your objectives? Assume interest remains at 9%.
$1,1
54
$2,2
54
$1,2
54
$3,2
54
4 points   
QUESTION 18
1. Project costing Rs. 8,00,000 and a life of 5 years is expected to bring
cash inflows of Rs.2,00,000 p.a. What is the payback period?
5 years
4 years
3 years
None of the
above
4 points   
QUESTION 19
1. How much would you have to put in the bank today at 5% to
accumulate $1,000 by next year?
85
2
59
2
 MBOF912D-Financial Management-Jul19-Assignment2
89
2
95
2
4 points   
QUESTION 20
1. You have $1000 you want to save. If four different banks offer four
different compounding methods for interest, which method should you choose
to maximize your $1000?
compounded daily
compounded
quarterly
compounded semi-
annually
compounded
annually
4 points   
QUESTION 21
1. The ______________ theory says that investors must be paid a premium
to hold long-term securities.
expectations
hypothesis
time value theory
segmentation
liquidity premium

1 points   
QUESTION 22
1. The controller's responsibilities are primarily _________in nature, while
the treasurer's responsibilities are primarily related to _______.
operational; financial
management
financial management;
accounting
accounting; financial
management
financial management;
operations
1 points   
QUESTION 23
1. Sale and Lease-back and Leveraged lease are types of finance lease.
 MBOF912D-Financial Management-Jul19-Assignment2
 True

 False

1 points   
QUESTION 24
1. Which of the following statements best summarizes the conclusions
reached regarding the stability of betas?
Betas for individual securities and large portfolios
are unstable.
Betas for individual securities are unstable.
Betas for individual securities and large portfolios
are stable.
Betas for large portfolios are unstable.

1 points   
QUESTION 25
1. The systematic risk level of a security is the slope of the security
market line.

 True

 False

1 points   
QUESTION 26
1. The practice generally known as double taxation is due to corporate
incomes being taxed at the corporate level, then again at the shareholder
level when corporate profits are paid out as dividends.

 True

 False

1 points   
QUESTION 27
1. Treasury bonds are subject to interest rate risk but are free of default
risk.

 True

 False

1 points   
QUESTION 28
1. Trade credit is a long term source of lending.
 MBOF912D-Financial Management-Jul19-Assignment2
 True

 False

1 points   
QUESTION 29
1. No company in India can pay final dividend if already paid an interim
dividend.

 True

 False

1 points   
QUESTION 30
1. The Excel function for Future value is FV (rate, nper, pmt, PV).

 True

 False

1 points   
QUESTION 31
1. The focal point of financial management in a firm is the creation of
value for shareholders.

 True

 False

1 points   
QUESTION 32
1. Financing short-term needs with long-term debt is consistent with a
conservative approach to financing working capital.

 True

 False

1 points   
QUESTION 33
1. If the total risk of firm X is greater than that of firm Y, then the beta of
firm X must be greater than that of firm Y.

 True

 False

1 points   
 MBOF912D-Financial Management-Jul19-Assignment2
QUESTION 34
1. For firms to raise capital in international markets, it is more important
to adhere to capital structure ratios similar to those found in the US and UK
than to those in the firm’s home country.

 True

 False

1 points   
QUESTION 35
1. An annuity is ___________________.
more than one payment
a series of unequal but consecutive
payments
a series of equal and consecutive
payments
a series of equal and non-consecutive
payments
1 points   
QUESTION 36
1. For a levered firm, the cost of equity, RE, is equal to the required
return on the firm's assets, RA.

 True

 False

1 points   
QUESTION 37
1. A firm that uses its weighted average cost of capital (WACC) to
evaluate all projects, regardless of their risk level, will tend to become riskier
over time.

 True

 False

1 points   
QUESTION 38
1. The decision function of financial management can be broken down
into the financing and investment decisions.

 True

 False
 MBOF912D-Financial Management-Jul19-Assignment2
1 points   
QUESTION 39
1. This sub-area of finance helps facilitate the capital flows between
investors and companies.
investments
financial management
treasury management
financial institutions and
markets
1 points   
QUESTION 40
1. A potential future negative impact to value and/or cash flows is often
discussed in terms of probability of loss and the expected magnitude of the
loss. This is known as risk.

 True

 False

1 points   
QUESTION 41
1. Risk, as it relates to working capital, means that there is jeopardy to
the firm for not maintaining sufficient current assets to meet its cash
obligations as they occur and take advantage of prompt payment discounts.

 True

 False

1 points   
QUESTION 42
1. Not all cash a company generates will be returned to the investors.
Which of the following will NOT reduce the amount of capital returned to the
investors?
retained earnings
taxes
dividends
None of these will reduce the amount of capital returned
to the investors
1 points   
QUESTION 43
1. Governments never issue stock because they cannot sell ownership
claims.
 MBOF912D-Financial Management-Jul19-Assignment2
 True

 False

1 points   
QUESTION 44
1. Market Value of debt instruments depends upon the market value of
collateral.

 True

 False

1 points   
QUESTION 45
1. With the introduction of risk-free borrowing and lending, the new
efficient frontier will be an arc that is higher than the old Markowitz arc
representing the efficient frontier.

 True

 False

1 points   
QUESTION 46
1. Inflation risk is diversifiable risk.

 True

 False

1 points   
QUESTION 47
1. Which is the most expensive source of funds?
New equity
shares
1 points   
New preference
shares QUESTION 48
1. A low
New price/earnings ratio usually means that a firm has positive expectations
debts
Retained for the future.
earnings
 True

 False

1 points   
QUESTION 49
1. Lease transactions in India are governed by the Lease Act.
 MBOF912D-Financial Management-Jul19-Assignment2
 True

 False

1 points   
QUESTION 50
1. In CAPM, β (Beta) factor measures return of an asset.

 True

 False

1 points   
QUESTION 51
1. Which of the following would be consistent with a hedging (maturity
matching) approach to financing working capital?
Financing short-term needs with short-term
funds.
Financing short-term needs with long-term
debt.
Financing seasonal needs with long-term
funds.
Financing some long-term needs with short-
term funds.
1 points   
QUESTION 52
1. Investors recognize the CAPM is useless for individual investors.

 True

 False

1 points   
QUESTION 53
1. What is the WACC for a firm with 50% debt and 50% equity that pays
12% on its debt, 20% on its equity, and has a 40% tax rate?
0.09
6
0.12
0.13
6
0.16

5 points   
QUESTION 54
 MBOF912D-Financial Management-Jul19-Assignment2
1. You are going to pay $800 into an account at the beginning of each of
20 years. The account will then be left to compound for an additional 20 years.
At the end of the 41st year you will begin receiving a perpetuity from the
account. If the account pays 14%, how much each year will you receive from
the perpetuity (round to nearest $1,000)?
$140,0
00
$150,0
00
$160,0
00
$170,0
00
5 points   
QUESTION 55
1. How much money must you pay into an account at the beginning of
each of 30 years in order to have $10,000 at the end of the 30th year?
Assume that the account pays 11% per annum, and round to the nearest $1.
$39
$46
$50
none of the
above
5 points   
QUESTION 56
1. How much will a firm need in cash flow before tax and interest to
satisfy debt holders and equity holders if: the tax rate is 35%, there is $13
million in common stock requiring a 10% return, and $6 million in bonds
requiring an 6% return?
$1,392,0
00
$1,488,0
00
$2,360,0
00
$2,480,0
00