FM MCQ

01) A firm is intending to create a sinking fund to retire Rs 500 million bonds after 10 years. How much
amount should the firm deposit at the end of each year to accumulate Rs 500 million after 10 years.
Assume that the fund deposited each year earns interest of 10%.
31.37 million

02) Time preference for money may arise due to

Uncertainty of cash flows
Availability of investment opportunities
Preference for current consumption
All of these

03) Future value uses the following technique

Compounding

04)What would be the present value if Rs 50000 were received after 20 years at 9% interest rate?
8900

05) You have borrowed a car of Rs 50000 from your employer. The loan requires 10% interest and five
equal end of year payments. How much is the monthly instalment?
1062.35

06) Jai Chand is planning for his retirement. He is 45 years old today, and would like to have Rs
300,000 when he attains the age of 60. He intends to deposit a constant amount of money at 12%
each year in the public provident fund in the state bank of India to achieve his objective. How much
money should Jai Chand invest at the end of each year, for the next 15 years, to obtain Rs 300,000 at
the end of that period.
8047

07) Determine the future value utilizing a time preference rate of 9% when the future value at the end
of eight years of an annual deposit of Rs 18000 each year.
198512.53

08) The Madurai Bank pays 12 percent and compounds interest quarterly. If one puts Rs 1000 initially
into a savings account, how much will it grow in 7 and 1/2 years.
2427

09) Which of the following’s are financing decisions?

Volkswagen borrows 350 million euros (€350 million) from Deutsche bank
Pfizer issues new shares to buy a small biotech company.
2&3

10) Maximization of which of the following is considered the best goal by financial experts
Value of the firm

11)Accounting is score keeping while finance is value maximizing.

TRUE
12) The conflict between managerial and stockholder interests is at the heart of the corporate
governance problem. In which of the following firm is the conflict between the two likely to be
greatest.
A publicly traded firm that is widely held by institutions but where the largest stockholder is also the
CEO.

13) If you accept the proposition that the objective in corporate finance is maximizing firm value.
Which of the following actions is inconsistent with that objective?
Taking advantage of loopholes in Loan agreements to increase earnings.

14) Which of the following are long term financial instruments?

Bond issued by Reliance company

15)SEBI Regulates,
Capital Markets

16) Which among the following is/are correct regarding Call Money?
It is the money lent/borrowed for maximum period of 14 days
Banks primarily borrow from inter-bank call money market
It is regulated by reserve bank of India
All of the above

17) Treasury bill is a govt bond for a short period usually

91 days
182 days
365 days
All of the above

18) Financial markets perform the following function/s.

Helps in price discovery
Provides liquidity
Reduces the cost of transacting
All of the above.