Answer: Option B
the unfixed portions of the
FINANCIAL
MANAGEMENT
EXAMVEDA
1. Investment is the
_______________.
A. net additions made to the
nation’s capital stocks
B. person’s commitment to buy
a flat or house
C. employment of funds on
assets to earn returns
D. employment of funds on
goods and services that are used
in production process
Answer: Option C
2. Financial Management is
mainly concerned with
______________.
A. All aspects of acquiring and
utilizing financial resources for
firms activities
B. Arrangement of funds
C. Efficient Management of
every business
D. Profit maximization
Answer: Option A
3. The primary goal of the
financial management is
____________.
A. to maximize the return
B. to minimize the risk
C. to maximize the wealth of
owners
D. to maximize profit
Answer: Option C
4. In his traditional role the
finance manager is responsible
for ___________.
A. proper utilisation of funds
B. arrangement of financial
resources
C. acquiring capital assets of the
organization
D. efficient management of
capital
Answer: Option B
5. Market value of the shares
are decided by ____________.
A. the respective companies
B. the investment market
C. the government
D. shareholders
D.
6. Which one of the following issue capital
is not a money market Answer: Option B
securities? 12. Future value interest
A. Treasury bills factor takes ____________.
B. National savings certificate A. Compounding rate
C. Certificate of deposit B. Discounting rate
D. Commercial paper C. Inflation rate
Answer: Option B D. Deflation rate
7. Capital budgeting is Answer: Option A
related to ________. 13. Financial leverage
A. long terms assets measures ____________.
B. short term assets A. sensitivity of EBIT with
C. long terms and short terms respect of % change with respect
assets to output
D. fixed assets B. % variation in the level of
Answer: Option A production
8. The expansion of CAPM is C. sensitivity of EPS with
____________. respect to % change in level of
A. Capital amount pricing EBIT
model. D. no change with EBIT and
B. Capital asset pricing model. EPS
C. Capital asset printing model. Answer: Option C
D. Capital amount printing 14. ___________ are financial
model. assets.
Answer: Option B A. Bonds
9. Working capital B. Machines
management is managing C. Stocks
____________. D. A and C
A. short term assets and Answer: Option D
liabilities 15. Present value takes
B. long term assets _________.
C. long terms liabilities A. Discounting rate
D. only short term assets B. Compounding rate
Answer: Option A C. Inflation rate
10. The company’s average D. Deflation rate
cost of capital is Answer: Option A
____________. 16. Operating leverage
A. the average cost of equity measures ____________.
shares and debentures A. business risk
B. the average cost of equity B. financial risk
preference shares C. both risks
C. the average cost of shares and D. production risk
all sources of long-term funds Answer: Option A
D. the average cost of short term 17. An example of a
funds derivative security is ______.
Answer: Option C A. a common share of General
11. The underwriter has to Motors
take up ________________. B. a call option on Mobil stock
A. the fixed portions of the issue C. a commodity futures contract
capital D. B and C
B. the unsubscribed part of the Answer: Option D
agreed portion 18. Financial leverage helps
C. the agreed portion or can one to estimate ____________.
refuse if A. business risk
B. financial risk
1
C. both risks
D. production risk
Answer: Option B
19. Traditional approach
confines finance function only
to _________ funds
A. raising
B. mobilizing
C. utilizing
D. financing
Answer: Option A
20. Operating leverage x
Financial leverage = ________
A. Combined Leverage
B. Financial Combined
Leverage
C. Operating Combined
Leverage
D. Fixed leverage
Answer: Option A
21. Most investors are risk
averse which
means____________.
A. they will assume more risk
only if they are compensated by
higher expected return
B. they will always invest in the
investment with the lowest
possible risk
C. they will always invest in the
investment with the lowest
possible risk
D. they avoid the stock market
due to the high degree of risk
Answer: Option D
22. The company's cost of
capital is called ________.
A. Leverage
B. Hurdle rate
C. Risk rate
D. Return rate
Answer: Option B
23. Which of the following
would be considered a risk-
free investment?
A. Gold
B. Equity in a house
C. High-grade corporate bonds
D. Treasury bills
Answer: Option D
24. Cost of retained earnings
is equal to _______.
A. Cost of equity
B. Cost of debt
C. Cost of bank loan
D. Cost of term loans
Answer: Option A
25. Beta measures the
________.
A. Investment risk rate
B. Financial risk
C. Market risk
D. Market and finance risk
Answer: Option C
26. Operating incomes and
the discount rate of a
particular risk class are the 2
factors determining
____________.
A. Dependence hypothesis
B. Traditional view
C. Modern view
D. Independence hypothesis
Answer: Option D
27. The largest single
institutional owner of common
stocks is________.
A. mutual funds
B. insurance companies
C. pension funds
D. commercial banks
Answer: Option A
28. EBIT is usually the same
thing as.
A. funds provided by operations
B. earnings before taxes
C. net income
D. operating profit
Answer: Option D
29. The decision to invest a
substantial sum in any
business venture expecting to
earn a minimum return is
called ____________.
A. working capital decision
B. an investment decision
C. a production decision
D. a sales decision
Answer: Option B
30. Savings accounts
are___________ but are
not__________.
A. negotiable; liquid
B. marketable; liquid
C. liquid; personal
D. liquid; marketable
Answer: Option D
2
31. The available capital
funds are to be carefully
allocated among competing
projects by careful
prioritization. This is called
____________.
A. capital positioning
B. capital structuring
C. capital rationing
D. capital budgeting
Answer: Option D
32. Treasury bills are traded
in the __________.
A. money market
B. capital market
C. government market
D. regulated market
Answer: Option A
33. The cost of capital of a
long term debt is generally.
A. Lower than the owned funds
B. Equal to that of owned funds
C. More or less than owned
funds
D. Higher than that of owned
funds
Answer: Option D
34. Which of the following
would not be considered as
capital market security?
A. A corporate bond
B. A common stock
C. A 6-month Treasury bill
D. A mutual fund share
Answer: Option C
35. Net working capital is the
excess of current asset over
____________.
A. Current liability
B. Net liability
C. Total payable
D. Total liability
Answer: Option A
36. The coupon rate is
another name for
the__________.
A. market interest rate
B. current yield
C. stated interest rate
D. yield to maturity
Answer: Option C
37. Dividends are
paid________________.
A. monthly
B. quarterly
C. semi-annually
D. yearly
Answer: Option D
38. Long term fund sources
are ___________.
A. Retained earnings
B. Debentures
C. Share capital
D. All of the above
Answer: Option D
39. If an investor states that
Intel is overvalued at 65 times,
he is referring to___________.
A. earnings per share
B. dividend yield
C. book value
D. P/E ratio
Answer: Option D
40. When a company uses
increased fixed cost for
production, this is an example
of what type of leverage.
A. operating leverage
B. financial leverage
C. variable cost leverage
D. combined leverage
Answer: Option A
41. If a preferred stock issue
is cumulative, this
means____________.
A. dividends are paid at the end
of the year
B. dividends is legally binding
on the corporation
C. unpaid dividends will be paid
in the future
D. unpaid dividends are never
repaid
Answer: Option C
42. When a company uses
debt fund in its financial
structure, it will lead to a
change in
A. Financial leverage
B. Operating leverage
C. Money market leverage
D. Stock market leverage
Answer: Option A
43. Which of the following is
not a characteristic of
investments companies?
A. pooled investing
B. diversification
C. managed portfolios
D. reduced expenses
Answer: Option D
44. Short term sources are
A. Bank credit B. closed-end investment
B. Public deposit company
C. Commercial papers C. unit investment trust
D. All of the above D. hedge fund
Answer: Option C Answer: Option D
45. A company having easy 51. Variable cost per unit.
access to the capital markets A. varies with the level of output
can follow a ____________ B. remains constant irrespective
dividend policy of the level of output
A. liberal C. changes with the growth of
B. formal the firm
C. strict D. does not change with volume
D. Varying of production
Answer: Option A Answer: Option B
46. Fixed cost per unit 52. Marketable securities are
_______. primarily________.
A. does not change with volume A. short-term debt instruments
of production B. short-term equity securities
B. be flexible according to the C. long-term debt instruments
rate of interest D. long-term equity securities
C. changes according to volume Answer: Option A
of production 53. The arbitrary process is
D. not remains constant the behavioral foundation for
Answer: Option C the ____________.
47. Re-order level is A. MM approach
____________than safety level. B. XX approach
A. higher C. Gorder approach
B. lower D. Miller approach
C. medium Answer: Option A
D. fixed 54. Which of the following
Answer: Option A generally traded on stock
48. The most popular type of exchanges?
Investment Company is a A. Unit investment trusts
________. B. Closed-end investment
A. unit investment trust companies
B. mutual fund C. Open-end investment
C. closed-end investment companies
company D. All trade on stock exchanges
D. real estate investment trust Answer: Option D
Answer: Option B 55. A group of mutual funds
49. Variable cost in an with a common management
organization are known as______________.
A. be fixed according to the rate A. fund syndicates
of growth B. fund conglomerates
B. changes with the volume of C. fund families
production D. fund complexes
C. does not change with volume Answer: Option C
of production 56. Financial leverage is also
D. remains constant known as.
Answer: Option B A. Trading on equity
50. An unmanaged fixed B. Trading on debt
income security portfolio C. Interest on equity
handled by an independent D. Interest on debt
trustee is known as Answer: Option A
a______________.
A. junk bond fund
3
57. Bonus share are not
permitted unless the
____________ shares, if any,
are made fully-paid.
A. partly paid
B. semi paid
C. fully paid
D. unpaid
Answer: Option A
58. Net asset value takes into
account____________.
A. both realized and unrealized
capital gains
B. only realized capital gains
C. only unrealized capital gains
D. neither realized nor
unrealized capital gains.
Answer: Option A
59. A firm will have
favourable leverage if its
_____ are more than the debt
cost
A. debt
B. interest
C. equity
D. earnings
Answer: Option D
60. Which of the following is
not an objective of financial
management?
A. Maximization of wealth of
shareholders
B. Maximization of profits
C. Mobilization of funds at an
acceptable cost
D. Ensuring discipline in the
organization.
Answer: Option D
61. If NAV > market price of
a fund, then the fund
________
A. is selling at a discount
B. is selling at a premium
C. is an index fund
D. is an exchange traded fund
Answer: Option A
62. The objective of financial
management is to
______________.
A. generate the maximum net
profit
B. generate the maximum
retained earnings
C. generate the maximum
wealth for its shareholders
D. generate maximum funds for
the firm at the least cost.
Answer: Option C
63. Mutual funds may be
affiliated with an underwriter.
This means____________.
A. the underwriter has an
exclusive right to distribute
shares
B. the underwriter selects the
securities in the portfolio
C. there is no risk to the issuer
of the mutual fund
D. there is no risk to the investor
of the mutual fund.
Answer: Option A
64. Operating leverage =
______.
A. contribution / EBIT
B. contribution / EBT
C. contribution / total expenses
D. contribution / operating PBT
Answer: Option A
65. The ___________ is a
window through which the
investor can see the company.
A. Syndicate offer
B. IPO
C. Prospectus
D. Shelf rule.
Answer: Option C
66. According to the
traditional approach cost of
capital affected by?
A. debt-equity mix
B. debt-capital mix
C. equity expenses mix
D. debt-interest mix
Answer: Option A
67. For which of the
following factors are the
debentures more attractive to
the investors?
A. The principal is redeemable
at maturity
B. A debenture-holder enjoys
prior claim on the assets of the
company over its shareholders
in the event of liquidation
C. trustee is appointed to
preserve the interest of the
debenture holders
D. All the above.
Answer: Option D
68. The formula of EBIT =
________
4
A. Sales - Variable cost
B. Contribution - Fixed cost
C. Sales - Fixed cost
D. All the above
Answer: Option B
69. Investment bankers
operate in the______________.
A. primary market
B. secondary market
C. A and B both
D. None of above
Answer: Option A
70. Shares having no face
value are known as
A. no par stock
B. at par stock
C. equal stock
D. debt equity stock
Answer: Option A
71. A company may raise
capital from the primary
market through
_____________.
A. Public issue
B. Rights issue
C. Bought out deals
D. All of the above
Answer: Option D
72. Which exchange member
is assigned to a specific trading
post?
A. Commission broker
B. Floor trader
C. Specialist
D. Dealer
Answer: Option C
73. A fixed rate of _________
is payable on debentures
A. dividend
B. Commission
C. Interest
D. Brokerage
Answer: Option C
74. According to traditional
approach, the average cost of
capital _______________.
A. Remains constant up to a
degree of leverage and rises
sharply thereafter with every
increase in leverage
B. Rises constantly with
increase in leverage
C. Decrease up to certain point,
remains unchanged for moderate
increase in leverage and rises
beyond a certain point
D. Decrease at an increasing rate
with increase in leverage
Answer: Option C
75. A computerized trading
network that matches buy and
sell orders electronically
entered by customers is
a___________.
A. national markets system
B. electronic communications
networks
C. internet investment service
D. global investment network.
Answer: Option B
76. Ownership securities are
represented by _______.
A. stock
B. loan
C. debt
D. debentures
Answer: Option A
77. The cost of capital of a
firm is ______________.
A. The dividend paid on the
equity capital
B. The weighted average of the
cost of various long-term and
short-term sources of finance
C. The average rate of return it
must earn on its investments to
satisfy the various investors
D. The minimum rate of return it
must earn on its investments to
keep its investors satisfied
Answer: Option D
78. If an investor is
attempting to buy a stock that
is very volatile, it would be
best to use___________.
A. market order
B. limit order
C. stop-loss order
D. contingency order.
Answer: Option B
79. Net working capital refers
to.
A. total assets minus fixed assets
B. current assets minus current
liabilities
C. current assets minus
inventories
D. current assets.
Answer: Option B
80. The constant growth
model of equity valuation
assumes that _____________.
A. the dividends paid by the
company remain constant
B. the dividends paid by the
company grow at a constant rate
of growth
C. the cost of equity may be less
than or equal to the growth rate
D. the growth rate is less than
the cost of equity.
Answer: Option B
81. Which of the following
has helped to eliminate the use
of stock certificates by placing
stock transactions on
computers?
A. Demat account
B. Securities Exchange
Commission
C. Depository Trust Company
D. Federal Depository Insurance
Corporation.
Answer: Option A
82. The expansion of EAR is?
A. equivalent annual rate
B. equivalent annuity rate
C. equally applied rate
D. equal advance rate
Answer: Option A
83. The formula for cost of
debt is __________.
A. I x ( 1 - t)
B. I+p
C. I-P
D. Ixp
Answer: Option A
84. Total return is equal
to________.
A. capital gain and yield
B. yield and interest
C. capital gain
D. yield
Answer: Option A
85. Traditional theorists
believe that.
A. there exists an optimal capital
structure
5
B. no optimal capital structure
C. equal optimal capital
structure
D. 100% debt financial
organizations
Answer: Option A
86. Which of the following is /
are assumption(s) underlying
the Miller and Modigliani
analysis?
A. Capital markets are perfect
B. Investors are assumed to be
rational and behave accordingly
C. There is no corporate or
personal income tax
D. All of the above.
Answer: Option D
87. The return component
that gives periodic cash flows
to the investor is known as
the______________.
A. capital gain
B. interest rate
C. yield
D. unrealized gain.
Answer: Option C
88. The dividend-payout
ratio is equal to __________.
A. the dividend yield plus the
capital gains yield
B. dividends per share divided
by earnings per share
C. dividends per share divided
by par value per share
D. dividends per share divided
by current price per share.
Answer: Option B
89. Altering the leverage
ratio does not influence the
market value of the firm. This
is the basic premise of
_______.
A. net income approach
B. traditional approach
C. modern approach
D. net operating income
approach
Answer: Option D
90. While calculating the
weighted average cost of
capital, market value weights
are preferred because
____________.
A. Book value weights are
historical in nature
B. This is in conformity with the
definition of cost of capital as
the investors minimum required
rate of return
C. Book value weights fluctuate
violently
D. Market value weights are
fairly consistent over a period of
time.
Answer: Option A
91. If market interest rates
are expected to rise, you would
expect___________.
A. bond prices to fall more than
stock prices
B. bond prices to rise more than
stock prices
C. stock prices to fall more than
bond prices
D. stock prices to rise and bond
prices to fall.
Answer: Option A
92. Which of the following is
an argument for the relevance
of dividends?
A. Informational content
B. Reduction of uncertainty
C. Some investors' preference
for current income
D. All of the above.
Answer: Option D
93. Which of the following
is/are false regarding capital
structure theory as stated by
Miller and Modigliani?
1) If agency costs are
considered, the expected
agency costs increases as the
debt-equity ratio decreases.
2) With the given assumptions,
there is no optimal capital
structure.
3) In the presence of taxes, the
market value of the firm
decreases by the tax shield of
debt
A. Only 1st statement
B. Only 2nd statement
C. Both 1st and 3rd statements
D. All the three statements.
Answer: Option D
94. Financial risk is most
associated
with_______________.
A. the use of equity financing by
corporations
B. the use of debt financing by
corporations
C. Equity investments held by
corporations
D. Debt investments held by
corporations.
Answer: Option B
95. Retained earnings are ?
A. an indication of a company's
liquidity
B. the same as cash in the bank
C. not important when
determining dividends
6
D. the cumulative earnings of
the company after dividends.
Answer: Option D
96. Which of the following
factors does not affect the
capital structure of a
company?
A. Cost of capital
B. Composition of the current
assets
C. Size of the company
D. Expected nature of cash
flows
Answer: Option B
97. Political stability is the
major factor
concerning_______________.
A. exchange risk
B. systematic risk
C. non-systematic risk
D. country risk
Answer: Option D
98. Arbitrage is the level
processing technique
introduced in _________.
A. Net income approach
B. MM approach
C. Operating approach
D. Traditional approach
Answer: Option B
99. The rational expectations
model of dividend policy says
that ______________.
A. Since the expectations of the
investors are always rational,
there will be no effect of
dividend policy on the valuation
of the firm
B. If the investors have rational
expectations, they will value a
dividend paying firm higher
than a non-dividend paying firm
C. If the declared dividend is in
line with expectations of the
investors, there will be no effect
on the valuation of the firm
D. If the declared dividend is in
accordance with the
expectations, the change in the
firms value will be minimal
Answer: Option D
100. Liquidity
risk_____________.
A. is the risk that investment
bankers normally face
B. is lower for small OTCEI
stocks than for large NSE stocks
C. is the risk associated with
secondary market transactions
D. increases whenever interest
rates increase.
Answer: Option D
101. In finance, "working
capital" means the same thing
as
A. Total assets
B. Fixed assets
C. Current assets
D. Current assets minus current
liabilities.
Answer: Option D
102. The Debt-Equity ratio of
a Company_______________.
A. Measure its financial
leverage
B. Does not affect the Earnings
per share
C. Affects the dividend decision
of the company
D. None of the above.
Answer: Option A
103. Which of the following is
not related to overall market
variability?
A. Financial risk
B. Interest rate risk
C. Purchasing power risk
D. Market risk
Answer: Option A
104. In proper capital
budgeting analysis we evaluate
incremental
A. accounting income
B. cash flow
C. earnings
D. operating profit
Answer: Option B
105. Which of the following
statement are true in respect
of working capital?
A. Gross Working Capital is the
sum of the total current assets
B. Net working capital
represents current assets -
current liablities
C. Net working capital can be
negative
D. All the above
Answer: Option D
106. The probability of
bankrupt is higher.
A. for a levered firm than an
unlevered firm
B. for an unlevered firm than a
levered firm
C. only levered firm
D. only unlevered firm
Answer: Option C
7
107. Which of the following
statement is true if the Net
Present Value (NPV) of a
positive?
A. The IRR must be greater than
0.
B. The discount rate exceeds the
cost of capital.
C. The profitability index equals
1
D. Accepting the project has an
indeterminate effect on
shareholders
Answer: Option A
108. If interest rates rose, you
would expect ____________ to
also rise.
A. business risk
B. financial risk
C. liquidity risk
D. inflation risk
Answer: Option C
109. All of the following
influence capital budgeting
cash flows EXCEPT.
A. accelerated depreciation
B. salvage value
C. tax rate changes
D. method of project financing
used
Answer: Option D
110. Financial management is
indispensable in any
organization as it helps
in______________.
A. taking sound financial
decisions
B. proper use and allocation
C. improving the profitability of
funds
D. all the above
Answer: Option D
 115. If the Dow Jones
Industrials had a price
111. This type of risk is appreciation of 6 percent one
avoidable through proper year and yet Total return for
diversification. the year was 11 percent; the
A. portfolio risk difference would be due
B. systematic risk to___________.
C. unsystematic risk A. the tax treatment of capital
D. total risk gains
Answer: Option C B. the cumulative wealth effect
C. dividends
D. profits
Answer: Option C
112. Financial analysts,
working capital means the
same thing as __________.
A. total assets 116. Shareholder wealth in a
B. fixed assets firm is represented
C. current assets by___________.
D. current assets minus current A. the number of people
Liabilities employed in the firm
Answer: Option D B. the book value of the firm's
assets less the book value of its
liabilities
C. the amount of salary paid to
its employees
113. Which of the following is D. the market price per share of
a basic principle of finance as the firms common stock
it relates to the management of Answer: Option D
working capital?
A. Profitability varies inversely
with risk
B. Liquidity moves together
with risk 117. In order to determine
C. Profitability moves together the compound growth rate of
with risk an investment over some
D. Profitability moves together period, an investor would
with liquidity calculate the_____________.
Answer: Option C A. arithmetic mean
B. geometric mean
C. calculus mean
D. arithmetic median
Answer: Option B
114. The return relative
solves the problem
of______________.
A. inflation
B. negative returns 118. Net present value is a
C. interest rates popular method which falls
D. tax differences A. With in non- discount cash
Answer: Option B flow method
B. With in discount cash flow
method
C. Equal With in non- discount
cash flow method
8
D. No discount cash flow
Answer: Option B
119. A major difference
between real and nominal
returns is
that_______________.
A. real returns adjust for
inflation and nominal returns do
not
B. real returns use actual cash
flows and nominal returns use
expected cash flows
C. real returns adjust for
commissions and nominal
returns do not
D. real returns show the highest
possible return and nominal
returns show the lowest possible
return
Answer: Option A
120. When most people refer
to the mean, they are referring
to the______________.
A. median
B. arithmetic mean
C. geometric mean
D. cumulative mean
Answer: Option B
121. The gross working
capital is a _____ concern
concept.
A. Going concern
B. money measurement
C. revenue concept
D. cost concept
Answer: Option A
122. _____________is
concerned with the
interrelationships between
security returns.
A. random diversification
B. correlating diversification
C. Friedman diversification
D. Markowitz diversification
Answer: Option D
123. The rate of return on
investment ____ with the
shortage of working capital.
A. falls
B. going
C. constant
D. change
Answer: Option A
124. Greater the size of a
business unit ________ will be
the requirements of working
capital.
A. larger
B. lower
C. no change
D. fixed
Answer: Option A
125. In order to determine
the expected return of a
portfolio, all of the following
must be known
except______________.
A. probabilities of expected
returns of individual assets
B. weight of each individual
asset to total portfolio value
C. expected return of each
individual asset
D. all of the above must be
known in order to determine the
expected return of a portfolio
Answer: Option D
126. The fixed proportion of
working capital should be
generally financed from the
____ capital sources.
A. fixed
B. variable
C. semi-variable
D. borrowed
Answer: Option D
127. Which of the following is
true regarding the expected
return of a portfolio?
A. It is a weighted average only
for stock portfolios
B. It can only be positive
C. It can never be above the
highest individual return
D. All of the above are true
Answer: Option C
128. The volume of sales is
influenced by ____ of a firm.
A. finance policy
B. credit policy
C. profit policy
D. fund policy
Answer: Option B
129. Company specific risk is
also known as ________.
A. Market risk
B. Systematic risk
C. Non-diversifiable risk
D. Idiosyncratic risk
Answer: Option D
130. Factoring is a form of
financing.
A. payable
B. receivables
C. borrowings
D. debts
Answer: Option B
9
131. The relevant risk for a
well-diversified portfolio
is____________.
A. interest rate risk
B. inflation risk
C. business risk
D. market risk
Answer: Option D
132. The decision function of
financial management can be
broken down into
the__________ decisions.
A. financing and investment
B. investment, financing, and
asset management
C. financing and dividend
D. capital budgeting, cash
management, and credit
management
Answer: Option B
133. Which of the following
portfolios has the least
reduction of risk?
A. A portfolio with securities all
having positive correlation with
each other
B. A portfolio with securities all
has zero correlation with each
other
C. A portfolio with securities all
having negative correlation with
each other
D. A portfolio with securities all
has skewed correlation with
each other
Answer: Option A
134. The time required to
process and execute an order
is called
A. allowed time
B. lead time
C. accepted time
D. fixed time
Answer: Option B
135. Portfolio risk is best
measured by
the______________.
A. expected value
B. portfolio beta
C. weighted average of
individual risk
D. standard deviation
Answer: Option C
136. The focal point of
financial management in a
firm is _________.
A. the number and types of
products or services provided by
the firm
B. the minimization of the
amount of taxes paid by the firm
C. the creation of value for
shareholders
D. the dollars profits earned by
the firm
Answer: Option C
137. Markowitz's main
contribution to portfolio
theory is___________.
A. that risk is the same for each
type of financial asset
B. that risk is a function of
credit, liquidity and market
factors
C. risk is not quantifiable
D. insight about the relative
importance of variances and co
variances in determining
portfolio risk
Answer: Option D
138. Owning two securities
instead of one will not reduce
the risk taken by an investor if
the two securities
are______________. 142. ____________dividend
A. perfectly positively promises to pay shareholders
correlated with each other at future date
B. perfectly independent of each A. Scrip
other B. Cash
C. perfectly negatively C. Stock
correlated with each other D. Property
D. of the same category, eg blue Answer: Option A
chips
Answer: Option A
143. __________ is concerned
with the maximization of a
139. The market price of a firm's stock price.
share of common stock is A. Shareholder wealth
determined by ___________. maximization
A. the board of directors of the B. Profit maximization
firm C. Stakeholder welfare
B. the stock exchange on which maximization
the stock is listed D. EPS maximization
C. the president of the company Answer: Option A
D. individuals buying and
selling the stock
Answer: Option D
144. The Markowitz model
assumes most investors
are_____________.
140. The major problem with A. risk averse
the Markowitz model is B. risk neutral
its_______________. C. risk seekers
A. lack of accuracy D. risk moderators
B. predictability flaws Answer: Option A
C. complexity
D. inability to handle large
number of inputs
Answer: Option C
145. According to the
_______ model, the dividend
decision is irrelevant.
A. MM
141. The long-run objective B. Garden
of financial management is C. Walter
to________. D. XY
A. maximize earnings per share Answer: Option A
B. maximize the value of the
firm's common stock
C. maximize return on
investment
D. maximize market share
Answer: Option B
10
146. According to 150. A portfolio which lies D. coefficient of variation
Markowitz, an efficient below the efficient frontier is Answer: Option B
portfolio is one that has described
the_________________. as________________.
A. largest expected return for A. optimal
the smallest level of risk B. unattainable
B. largest expected return and C. dominant 155. Good inventory
zero risk D. dominated management is good ________
C. largest expected return for a Answer: Option D management.
given level of risk A. financial
D. smallest level of risk B. Marketing
Answer: Option C C. stock
D. purchasing
151. Offering cash discount Answer: Option D
to customers result in _______.
A. reducing the average
147. The cash management collection period
refers to management of B. increasing the average
___________. collection period 156. Non-systematic risk is
A. cash only C. increasing sales also known as_____________.
B. cash and bank balances D. decreasing sales A. riskless
C. cash and near cash assets Answer: Option A B. market risk
D. fixed assets C. random risk
Answer: Option C D. company-specific risk
Answer: Option D

152. The optimal portfolio is

the efficient portfolio with
148. Portfolios lying on the the______________.
upper right portion of the A. lowest risk 157. Setup cost is a type of
efficient frontier are likely to B. highest risk __________ cost.
be chosen by_______________. C. highest utility A. fixed
A. aggressive investors D. least investment B. variable
B. conservative investors Answer: Option C C. semi variable
C. risk-averse investors D. carrying
D. defensive investors Answer: Option A
Answer: Option A

153. A higher accounts

149. Miller- Orr Model is
suitable in those circumstances
when the ________.
A. Demand for cash is steady
B. Demand for cash is not
steady
C. Carry cost and transaction
cost are to be kept at minimum
D. Demand for cash is variable
Answer: Option D
receivable turnover ratio
means__________. 158. Under the P/E model,
A. lower debt collection period stock price is a product
B. higher debt collection period of_____________.
C. lower sales A. EPS and DPS
D. higher sales B. P/E ratio and EPS
Answer: Option A C. EPS and required return
D. P/E ratio and required return
Answer: Option B
154. Market risk is best
measured by
the____________. 159. The amount of the
A. alpha temporary working capital
B. beta __________.
C. standard deviation

11
A. keeps on fluctuating from
time to time
B. remains constant for all times
C. financed through long term
services
D. none of the above.
Answer: Option A
160. Book value
is_______________.
A. the same as market value
B. a more accurate valuation
technique than the dividend
models
C. the accounting value of the
firm as reflected in the financial
statements
D. the same as liquidation value
Answer: Option C
161. To whom does the
Treasurer most likely report?
A. Chief Financial Officer
B. Vice President of Operations
C. Chief Executive Officer
D. Board of Directors
Answer: Option A
162. The price to book value
ratio tends to be close
for_____________.
A. high-tech companies
B. banks
C. utilities
D. service companies
Answer: Option B
163. The return after the pay
off period is not considered in
case of __________.
A. Payback period method
B. Interest rate method
C. Present value method
D. Discounted cash flow method
Answer: Option A
164. ___________ shifts the
weights of securities in the
portfolio to take advantage of
areas that is expected to do
relatively better than other
areas.
A. portfolio management
B. market timing
C. momentum strategy
D. sector rotation
Answer: Option D
165. Depreciation is include
in costs in case of __________.
A. Pay back method
B. Accounting rate
C. Discounted cash flow
D. Present value method
Answer: Option B
166. The central issue of
efficient markets
concerns______________.
A. regulations
B. information
C. participants
D. structure
Answer: Option B
167. What is the most
appropriate goal of the firm?
A. Shareholder wealth
maximization
B. Profit maximization
C. Stakeholder maximization
D. EPS maximization
Answer: Option A
12
168. A bond issue is broken
up so that some investors will
receive only interest payments
while others will receive only
principal payments, which is
an example of ________.
A. bundling
B. un-bundling
C. financial engineering
D. credit enhancement
E. B & C
Answer: Option E
169. __________ is concerned
with the acquisition, financing,
and management of assets
with some overall goal in
mind.
A. Financial management
B. Profit maximization
C. Agency theory
D. Social responsibility
Answer: Option A
170. If a market is inefficient,
as new information is received
about a security____________.
A. nothing will happen
B. the stock price will fall at
first and then later rise
C. there will be a lag in the
adjustment of the stock price
D. there will be negative
demand for the stock
Answer: Option C
171. The bonus issue is
permitted to be made out of
__________ and premium
collected in cash.
A. free reserves
B. free interest
C. free bonus
D. free cash dividend
Answer: Option A

172. The bonus issue is made
to make the nominal value and
the __________ value of the
shares of the company.
A. Face
B. Market
C. Stock
D. Real
Answer: Option B
173. The highest level of
market efficiency
is_____________.
A. weak form efficiency
B. semi-strong form efficiency
C. random walk efficiency
D. strong form efficiency
Answer: Option D
174. Having defined working
capital as current assets, it can
be further classified according
to __________.
A. Financing method and time
B. rate of return and financing
method
C. time and rate of return
D. components and time
Answer: Option D
175. The weak form of the
EMH is supported if
successive price changes over
time are________.
A. independent of each other
B. negative
C. positive
D. lagged
Answer: Option A
176. Dividend policy of a firm 180. The amount of current
affects both the long-time assets that varies with seasonal
financing and __________ requirements is referred to as
wealth. __________ working capital.
A. Owners A. Permanent
B. Creditors B. Net
C. Debtor C. Temporary
D. Shareholders D. Gross
Answer: Option D Answer: Option C
177. The random walk 181. The last step in
hypothesis is most related to fundamental analysis
the___________. is__________.
A. weak-form EMH A. economic analysis
B. semi strong-form EMH B. industry analysis
C. semi weak-form EMH C. company analysis
D. strong-form EMH D. technical analysis
Answer: Option A Answer: Option D
178. ______________ is the 182. Excess working capital
distribution of the profits of a results in ________.
company among its A. Block of cash
shareholders. B. Loosing interests
A. Shares C. Lack of production
B. Interest D. Lack of smooth flow of
C. Dividend production
D. Commission Answer: Option A
Answer: Option C
183. The value of a derivative
179. If an investor searches security _______.
for patterns in security A. depends on the value of the
returns by examining various related primitive security
techniques applied to a set of B. can only cause increased risk
data, this is known C. is unrelated to the value of
as__________. the related primitive security
A. fundamental analysis D. is worthless today
B. technical analysis Answer: Option A
C. data mining
D. random-walk theory
Answer: Option B
184. The market value of the
firm is the result of
__________.
A. dividend decisions
B. working capital decisions
C. capital budgeting decisions
13
D. trade-off between cost and B. Risk returns trade off
risk C. Deployment of funds
Answer: Option D 189. Cost of capital is the D. Control over the uses of
______ rate of return expected funds
by the investor. E. All of above
A. minimum Answer: Option E
B. maximum
185. Money market funds C. expected
were a financial innovation D. marginal
partly inspired to circumvent Answer: Option C
__________. 194. Which of the following
A. Regulation Q, which is no represents the rate at which a
longer in existence company can grow from
B. Regulation M internal sources?
C. Regulation D 190. In which of the following A. return on assets
D. Regulation B, which is still in sections of a balance sheet are B. sustainable growth rate
existence "Inventories" listed? C. adjusted EPS
Answer: Option A A. Current assets D. return on equity
B. Property, plant and Answer: Option B
equipment, at cost
C. Current liabilities
D. Shareholders' Equity
186. Insufficient working Answer: Option A
capital results in __________. 195. Which of the following
A. Block of cash techniques of project appraisal
B. Loosing interests does not consider the time
C. Lack of production value of money?
D. Lack of smooth flow of 191. ________ decision A. Benefit cost ratio
production relates to the determination of B. Net present value
Answer: Option D total amount of assets to be C. Internal rate of return
held in the firm. D. Accounting Rate of Return
A. Financing Answer: Option D
B. Investment
C. Dividend
187. Effective cost of D. Controlling
debentures is _________ as Answer: Option B
compared to shares. 196. The sustainable growth
A. higher rate of a firm can be
B. lower calculated as the product of
C. equal the_________.
D. medium 192. The key item for A. return on assets and the
Answer: Option B investors on the income return on equity
statement is______________. B. dividend payout ratio and
A. sales leverage
B. gross profit C. retention rate and the return
C. operating expenses on equity
188. Risk lover's utility D. after-tax net income D. net profit margin and total
curves have __________. Answer: Option D sales
A. Positive slope Answer: Option C
B. Negative slope
C. Convex to the origin
D. Negative slope and convex to
the origin 193. Which of the following is
Answer: Option C a function of the finance 197. Under trading means.
manager? A. Having low amount of
A. Mobilizing funds working capital

14
B. High turnover of working
capital
C. Sales are less compared to
assets employed
D. Low turnover of working
capital
Answer: Option D
198. One way to obtain
earnings forecasts is the
mechanical procedure known
as___________.
A. cross-reference analysis
B. exponential trending
C. time series analysis
D. data mining
Answer: Option C
199. In modern investment
analysis, the risk for a stock is
related to its_____________.
A. leverage factor
B. standard deviation
C. beta coefficient
D. coefficient of variation
Answer: Option C
200. The risk that arises due
to change in the purchasing
power is called ?
A. Financial risk
B. Interest rate risk
C. Business risk
D. Inflation risk
Answer: Option D
201. _______ uses a computer
program in an attempt to
imitate the brain in analysing
securities.
A. Decision trees
B. Program trading
C. Day traders
D. Neural networks
Answer: Option D
202. The factor(s) which
affect(s) P/E ratio is/are
__________.
A. Growth rate
B. Debt proportion
C. Retention ratio
D. All of the above
Answer: Option D
203. The difference between
the cash price and the futures
price on the same asset or
commodity is known as
the________________.
A. basis
B. spread
C. yield spread
D. premium
Answer: Option A
204. Long -term solvency is
indicated by
A. Liquidity ratio
B. Debt-equity ratio
C. Return coverage ratio
D. Both a and b
Answer: Option B
205. Speculators in the
futures
markets_____________.
A. make the market more
volatile
B. contribute liquidity to the
market
C. engage mainly in short sales
D. serve no real economic
function
Answer: Option C
15
206. Which of the following
is/are the problem(s)
encountered in financial
statement analysis?
A. Development of benchmarks
B. Window dressing
C. Interpretation of results
D. All of the above
Answer: Option D
207. A major difference
between individual and
institutional investors is their
very different_______.
A. approaches to market
analysis
B. evaluations of return
C. time horizons
D. types of securities held in
their portfolios
Answer: Option C
208. Earnings Per Share
(EPS) is equal to __________.
A. Profit before tax/No of
outstanding shares
B. Profit after tax/No of
outstanding shares
C. Profit after tax/Amount of
equity share capital
D. Profit after tax less equity
dividends/No of outstanding
shares
Answer: Option B
209. __________ are a way U.
S. investors can invest in
foreign companies.
A. ADRs
B. IRAs
C. SDRs
D. GNMAs
Answer: Option A

210. Degree of total leverage
can be applied in measuring
change in _________.
A. EBIT to a percentage change
in quantity
B. EPS to a percentage change
in EBIT
C. EPS to a percentage change
in quantity
D. Quantity to a percentage
change in EBIT
Answer: Option C
211. Investors can normally
afford to assume larger risks
in the ____ phase of the life-
cycle.
A. accumulation
B. consolidation
C. spending
D. gifting
Answer: Option B
212. The measure of business
risk is __________.
A. operating leverage
B. financial leverage
C. total leverage
D. working capital leverage
Answer: Option A
213. __________ is the most
important investment decision
because it determines the risk-
return characteristics of the
portfolio.
A. Hedging
B. Market timing
C. Performance measurement
D. Asset allocation
Answer: Option D
214. The value of EBIT at
which EPS is equal to zero is
known as ____________.
A. Break-even point
B. Financial break-even point
C. Operating break-even point
D. Overall break-even point
Answer: Option B
215. A model for optimizing
the selection of securities is the
______ model.
A. Miller-Orr
B. Black-Sholes
C. Markowitz
D. Gordon
Answer: Option C
216. Degree of financial
leverage is a measure of
relationship between
___________.
A. EPS and EBIT
B. EBIT and quantity produced
C. EPS and quantity produced
D. EPS and sales
Answer: Option A
217. The Markowitz model
identifies the efficient set of
portfolios, which offers the
____________.
A. highest return for any given
level of risk or the lowest risk
for any given level of return
B. least-risk portfolio for a
conservative, middle-aged
investor
C. long-run approach to wealth
accumulation for a young
investor
D. risk-free alternative for risk-
averse investors
Answer: Option A
16
218. Operating leverage
examines.
A. The effect of the change in
the quantity on EBIT
B. The effect of the change in
EBIT on the EPS of the
company
C. The effect of the change in
output to the EPS of the
company
D. The effect of change in EPS
on the output of the company
Answer: Option A
219. Which of the following is
not normally one of the
reasons for a change in an
investor's circumstances?
A. Change in market conditions
B. Change in legal
considerations
C. Change in time horizon
D. Change in tax circumstances
Answer: Option B
220. Which of the following is
the expression for operating
leverage?
A. Contribution/EBIT
B. EBT/Contribution
C. Contribution/EAT
D. Contribution/Quantity
Answer: Option A
221. The material wealth of a
society is equal to the sum of
_________.
A. all financial assets
B. all real assets
C. all financial and real assets
D. all physical assets
Answer: Option C
222. Operating Leverage is
the response of changes in
__________
A. EBIT to the changes in sales
B. EPS to the changes in EBIT
C. Production to the changes in
sales
D. None of the above
Answer: Option A
223. _______ is example of
financial intermediaries.
A. Commercial banks
B. Investment bank
C. Insurance companies
D. All of the above
Answer: Option D
224. Walters model on
dividend policy assumes that.
A. the firm offers an increasing
amount of dividend per share at
a given level of price per share
B. the firm has a finite life
C. the cost of capital of the firm
is variable
D. equal to current assets plus
current liabilities including bank
borrowings
Answer: Option D
225. Financial intermediaries
exist because small investors
cannot efficiently ________.
A. diversify their portfolios
B. gather all relevant
information
C. assess credit risk of
borrowers
D. advertise for needed
investments
E. all of above
Answer: Option E
226. The use of preference
share capital as against debt
finance.
A. Reduces DFL
B. Increases DFL
C. Increases financial risk
D. Both a and b
Answer: Option A
227. Firms that specialize in
helping companies raise
capital by selling securities are
called ________.
A. commercial banks
B. investment banks
C. savings banks
D. credit unions
Answer: Option B
228. The Degree of Financial
Leverage (DFL)
A. Measures financial risk of the
firm
B. Is zero at financial break-
even point
C. Increases as EBIT increases
D. Both a and b
Answer: Option A
229. Financial assets ______.
A. directly contribute to the
country's productive capacity
B. indirectly to the country's
productive capacity
C. contribute to the country's
productive capacity both directly
and indirectly
D. do not contribute to the
country's productive capacity
either directly or indirectly
Answer: Option A
17
230. Dividend changes are
perceived important than the
absolute level of dividends
because.
A. management change
dividends to protect their seats
B. dividend changes are thought
to signal future expectations
C. MM state that absolute level
of dividends is irrelevant
D. changes determine the level
of borrowing
Answer: Option B
231. Investment bankers
perform the following role
___________.
A. market new stock and bond
issues for firms
B. provide advice to the firms as
to market conditions, price, etc
C. design securities with
desirable properties
D. all of the above
Answer: Option D
232. Which of the following is
the assumption of the MM
model on dividend policy?
A. The firm is an all-equity firm
B. The investments of the firm
are financed solely by retained
earnings
C. The firm has an infinite life
D. None of the above
Answer: Option C
233. Investors seeking to
avoid actively managing their
portfolios will prefer which of
the following assets?
A. Common stock
B. Commercial bank deposits
C. Financial futures
D. Real estate
Answer: Option B
 Answer: Option D

242. The expected return on

234. Which of the following
short term securities is
inappropriate for an
individual, desiring funds for
financial emergencies?
A. treasury bills
B. certificates of deposit
C. financial futures
D. savings accounts
Answer: Option C
an investment in stock
is___________.
238. Diversification reduces A. the expected dividend
_________. payments
A. Interest rate risk B. the anticipated capital gains
B. Market risk C. the sum of expected
C. Unique risk dividends and capital gains
D. Inflation risk D. less than the realized return
Answer: Option C Answer: Option C

239. What are the factors 243. Which of the following is

235. Which of the following
methods does a firm resort to
avoid dividend payments?
A. Share splitting
B. Declaring bonus shares
C. Rights issue
D. New issue
Answer: Option B
which make debentures
attractive to investors?
A. They enjoy a high order of
priority in the event of
liquidation
B. Stable rate of return
C. No risk
D. All of the above
Answer: Option D
not a source of long-term
finance?
A. Equity shares
B. Preference shares
C. Commercial papers
D. Reserves and surplus
Answer: Option C

244. If the dispersion around

236. Asset allocation affects
the investor's return
by______________.
A. altering the returns on
individual assets
B. weighting the portfolio return
by the allocation
C. assuring diversification
D. increasing the investor's use
of mutual funds
Answer: Option B
240. Unsystematic risk
is______.
A. the risk associated with
movements in security prices
B. reduced through
diversification
C. higher when interest rates rise
D. the risk of loss of purchasing
power
Answer: Option B
a security's return is larger
____________.
A. the expected return is smaller
B. the standard deviation is
smaller
C. the stock's price is higher
D. the security's risk is higher
Answer: Option D

245. EBIT means

237. Which of the following
characteristics are true, with
reference to preference
capital?
A. Preference dividend is not tax
deductible
B. The claim of preference
shareholders is prior to the claim
of equity shareholders
C. Preference shareholders are
not the owners of the concern
D. All of the above
241. The method of raising
equity capital from existing
members by offering securities
on pro rata basis is referred to
as __________.
A. Public issue
B. Right Issue
C. Private placement
D. Bought-Out-Deal
Answer: Option B
_____________.
A. Operating Income
B. Operating Profit
C. Earnings before interest and
tax
D. All of the above
Answer: Option D
246. Another name for stock
brokers is______________.
A. specialists

18
B. registered representatives
C. security analysts
D. portfolio managers
Answer: Option B
247. Which of the following
factors influence(s) the capital
structure of a business entity?
A. Bargaining power with the
suppliers
B. Demand for the product of
the company
C. Technology adopted
D. Adequate of the assets to
meet any sudden spurt in
demand
Answer: Option C
248. Investment professionals
whose jobs may depend on
their performance relative to
the market are
the______________.
A. registered representatives
B. security analysts
C. investment bankers
D. portfolio managers
Answer: Option A
249. Which of the following
ratios is not affected by the
financial structure and the tax
rate of a company?
A. Net profit margin
B. Earning power
C. Earnings per share
D. Capitalization rate
Answer: Option C
250. One reason for the
declining importance of
pension funds is
the_______________.
A. decrease in pension benefits
for workers
B. downsizing of US companies 254. Underlying all
C. large number of conversions investments is the trade-off
into self-directed plans between_________.
D. increasing number of federal A. expected return and actual
regulations that restrict pension return
fund portfolios B. low risk and high risk
Answer: Option B C. actual return and high risk
D. expected return and risk
Answer: Option D
251. Under which of the
following approaches cost of
equity capital is assumed to be 255. While calculating
constant with the change in weighted average cost of
leverage? capital _________.
A. Net income approach A. Preference shares are given
B. Modigliani and Miller more weight age
approach B. Cost of issue is considered
C. Net operating income C. Tax factor is ignored
approach D. Risk factor is ignored
D. Traditional approach Answer: Option B
Answer: Option A
256. Mumbai stock exchange
252. Most financial advisors was recognized on a
are registered with the permanent basis
Securities and Exchange in___________.
Commission A. 1950
as_______________. B. 1956
A. registered representatives C. 1957
B. registered investor advisors D. 1965
C. registered financial planners Answer: Option C
D. registered securities
consultants
Answer: Option C
257. Over the Counter
Exchange of India was started
after the role model
253. Which of the following of_________.
approaches advocates that the A. NASAQ
costs of equity capital and debt B. JASAQ
capital remain unaltered when C. NASDAQ& JASDAQ
the degree of leverage varies? D. NSE
A. Net Income Approach Answer: Option C
B. Traditional Approach
C. Modigliani-Miller Approach
D. Net operating Income
Answer: Option A
19
258. Which, among the
following, are common
misconceptions about cost of
capital?
A. Depreciation-generated funds
have no cost
B. Cost of capital is low if a
project is heavily debt-financed
C. Cost of equity is equal to the
dividend rate
D. All of the above
Answer: Option D
259. The Accounting period
cycle of NSE is___________.
A. Wednesday to next Tuesday
B. Tuesday to next Wednesday
C. Monday to next Friday
D. Wednesday to next
Wednesday
Answer: Option A
260. Which of the following is
not a feature of an optimal
capital structure?
A. Safety
B. Flexibility
C. Control
D. Solvency
Answer: Option B
261. The growth in book
value per share shows
the_____________.
A. rise in share price
B. increase in physical asset of
the firm
C. increase in net worth
D. growth in reserves
Answer: Option D
262. The overall
capitalization rate and the cost
of debt remain constant for all
degrees of leverage. This is
pronounced by __________.
A. Traditional approach
B. Net operating income
approach
C. Net income approach
D. MM approach
Answer: Option C
263. International investing
is________________.
A. is only practical for
institutional investors
B. increases the overall risk of a
stock portfolio
C. always leads to higher returns
than a domestic portfolio
D. can reduce risk due to
increased diversification
Answer: Option C
264. Which of the following is
not an assumption in the
Miller & Modigliani
approach?
A. There are no transaction costs
B. Securities are infinitely
divisible
C. Investors have homogeneous
expectations
D. All the firms pay tax on their
income at the same rate
Answer: Option D
265. Mr. A is a daring
portfolio manager. He wants
to increase the return in his
portfolio. He should choose
stocks from_______________.
A. defensive industry
B. industry at a growth stage
C. industry in the maturity
period
20
D. industry with more export
potential
Answer: Option B
266. Which of the following is
not an assumption in Miller
and Modigliani approach?
A. There are no corporate or
personal income tax
B. Investors are assumed to be
rational and behave accordingly
C. There is no corporate tax
though there are personal
income tax
D. Capital markets are perfect
Answer: Option D
267. ________________
factors lead to activity of stock
market.
A. Money supply
B. Per capita income
C. Unemployment rate
D. Manufacturing and Trade
Answer: Option A
268. Which of the following is
/ are assumption behind the
realized yield approach?
A. The yield earned by investors
has been, on average, in
conformity with their
expectations
B. The dividends will continue
growing at a constant rate
forever
C. The market price will
continue growing at a constant
rate forever
D. Both a and b
Answer: Option D
269. In the weekly efficient
market, the stock price
reflects.
A. the company's financial
performance
B. the past price of the scrip
C. the demand for the scrip
D. the past price and traded
volumes
Answer: Option D
270. One of the statements
given below provides evidence
for the semi-strongly efficient
form.
A. Low P/E ratio effect
B. The size effect
C. Effect on the stock split
D. Weekend effect
Answer: Option C
271. A growth industry is
defined as ____________.
A. an industry with 15% rate of
growth per annum
B. an industry where demand for
its product is growing
C. an industry with high capital
investment
D. an industry with average
growth higher than the growth
of the economy
Answer: Option D
272. In BSE shares are
divided into_______________.
A. two categories
B. three categories
C. four categories
D. five categories
Answer: Option B
273. The value of bond
depends on ____________.
A. the coupon rate Answer: Option C
B. years to maturity
C. expected yield to maturity
D. all the above
Answer: Option D
278. Net income available to
stockholders is Rs 125 and
total assets are Rs 1,096 then
return on common equity
274. _________ is equal to would be
(common shareholders' A. 0.11%
equity/common shares B. 11.40%
outstanding). C. 0.12 times
A. book value per share D. 12.00%
B. liquidation value per share Answer: Option B
C. market value per share
D. Tobin's Q
Answer: Option A
279. Price per share is Rs 30
and an earning per share is Rs
3.5 then price for earning ratio
275. Corner portfolio are would be
calculated where a A. 8.57 times
___________. B. 8.57%
A. Security enters C. 0.11 times
B. Security leaves D. 11.00%
C. Security enters or leave Answer: Option A
D. Security with high extreme
value enters
Answer: Option C
280. Price per share is Rs 25
and cash flow per share is Rs 6
then price to cash flow ratio
276. The relationship would be
between potential A. 0.24 times
unsystematic risk and reward B. 4.16 times
is given by ___________. C. 4.16%
A. Excess return to beta ratio D. 24.00%
B. Excess return to security Answer: Option B
C. Excess return to security
D. Excess return to beta square
ratio
Answer: Option A
281. Low price for earning
ratio is result of
A. low risky firms
B. high risky firms
277. A technique uses in C. low dividends paid
comparative analysis of D. high marginal rate
financial statement is Answer: Option A
A. graphical analysis
B. preference analysis
C. common size analysis
D. returning analysis
21
282. Profit margin = 4.5%,
assets turnover = 2.2 times,
equity multiplier = 2.7 times
then return on equity will be
A. 26.73%
B. 25.73%
C. 9.40%
D. 9.00%
Answer: Option A
283. Formula such as net
income available for common
stockholders divided by total
assets is used to calculate
A. return on total assets
B. return on total equity
C. return on debt
D. return on sales
Answer: Option A
284. Price per ratio is divided
by cash flow per share ratio
which is used for calculating
A. dividend to stock ratio
B. sales to growth ratio
C. cash flow to price ratio
D. price to cash flow ratio
Answer: Option D
285. A techniques uses to
identify financial statements
trends are included
A. common size analysis
B. percent change analysis
C. returning ratios analysis
D. Both A and B
Answer: Option D
286. Net income available to
stockholders is Rs 150 and
total assets are Rs 2,100 then
return on total assets would be
A. 0.07%
B. 7.14%
C. 0.05 times
D. 7.15 times
Answer: Option B
287. A formula such as net
income available to common
stockholders divided by
common equity is used to
calculate
A. return on earning power
B. return on investment
C. return on common equity
D. return on interest
Answer: Option C
288. Companies that help to
set benchmarks are classified
as
A. competitive companies
B. benchmark companies
C. analytical companies
D. return companies
Answer: Option B
289. Total assets divided
common equity is a formula
uses for calculating
A. equity multiplier
B. graphical multiplier
C. turnover multiplier
D. stock multiplier
Answer: Option A
290. Price per share divided
by earnings per share is
formula for calculating
A. price earning ratio
B. earning price ratio
C. pricing ratio
D. earning ratio
Answer: Option A
22
291. Profit margin multiply
assets turnover multiply
equity multiplier is used to
calculate
A. return on turnover
B. return on stock
C. return on assets
D. return on equity
Answer: Option D
292. Company low earning
power and high interest cost
cause financial changes which
have
A. high return on equity
B. high return on assets
C. low return on assets
D. low return on equity
Answer: Option B
293. Ratios which relate
firm's stock to its book value
per share, cash flow and
earnings are classified as
A. return ratios
B. market value ratios
C. marginal ratios
D. equity ratios
Answer: Option B
294. An equation in which
total assets are multiplied to
profit margin is classified as
A. du DuPont equation
B. turnover equation
C. preference equation
D. common equation
Answer: Option A
295. Price earning ratio and
price by cash flow ratio are
classified as
A. marginal ratios
B. equity ratios
C. return ratios
D. market value ratios
Answer: Option D
296. Return on assets = 5.5%,
Total assets Rs 3,000 and
common equity Rs 1,050 then
return on equity would be
A. Rs 22,275.00
B. 15.71%
C. 1.93%
D. 1.925 times
Answer: Option B
297. If profit margin = 4.5%
and total assets turnover =
1.8% then return on assets
DuPont equation would be
A. 2.50%
B. 8.10%
C. 0.40%
D. 4.00%
Answer: Option B
298. High price to earning
ratio shows company's
A. low dividends paid
B. high risk prospect
C. high growth prospect
D. high marginal rate
Answer: Option C
299. Return on assets = 6.7%
and equity multiplier = 2.5%
then return on equity will be
A. 16.75%
B. 2.68%
C. 0.37%
D. 9.20%
Answer: Option A
300. Process of comparing
company results with other
leading firms is considered as
A. comparison
B. analysis
C. benchmarking
D. return analysis
Answer: Option C
301. An equity multiplier is
multiplied to return on assets
to calculate
A. return on assets
B. return on multiplier
C. return on turnover
D. return on stock
Answer: Option A
302. An annual estimated
costs of assets uses up every
year are included
A. depreciation and amortization
B. net sales
C. net profit
D. net income
Answer: Option A
303. Proceeds of company
shares of sold stock is
recorded in
A. preferred stock account
B. common stock account
C. due stock account
D. preceded stock account
Answer: Option B
304. Statement of cash flows
are included
A. operating activities
B. investing activities
C. financing activities
D. all of above
Answer: Option D
305. A company purchases
goods but does not pay
payments to suppliers
immediately and record them
as
A. account payable
B. account receivable
C. current liabilities
D. accumulated liabilities
Answer: Option A
306. In calculation of net cash
flow, depreciation and
amortization are treated as
A. current liabilities
B. income expenses
C. non-cash revenues
D. non-cash charges
Answer: Option D
307. Payments if it is made at
end of each period such as an
end of year is classified as
A. ordinary annuity
B. deferred annuity
C. annuity due
D. Both A and B
Answer: Option D
308. In time value of money,
nominal rate is
A. not shown on timeline
B. shown on timeline
C. multiplied on timeline
D. divided on timeline
Answer: Option A

23
309. Value of net income is
Rs 124,500,000 and common
shares outstanding are Rs
60,000,000 then earning per
share will be
A. Rs 2.75
B. Rs 0.48
C. Rs 2.08
D. Rs 2.80
Answer: Option C
310. Stockholders that do not
get benefits even if company's
earnings grow are classified as
A. preferred stockholders
B. common stockholders
C. hybrid stockholders
D. debt holders
Answer: Option A
311. In balance sheet, sum of
retained earnings and
common stock are considered
as
A. preferred equity
B. due equity
C. common perpetuity
D. common equity
Answer: Option D
312. Securities with less
predictable prices and have
longer maturity time is
considered as
A. cash equivalents
B. long-term investments
C. inventories
D. short-term investments
Answer: Option D
313. Number of shares
outstanding if it is divided by
net income for using to
calculate
A. earning per share
B. dividends per share
C. book value of share
D. market value of shares 318. An income available for
Answer: Option A shareholders after deducting
expenses and taxes from
revenues is classified as
A. net income
B. net earnings
314. Purchase cost of assets C. net expenses
over its useful life is classified D. net revenues
as Answer: Option A
A. appreciation
B. depreciation
C. appreciated assets
D. appreciated liabilities
Answer: Option B 319. Security present value is
Rs 100 and future value is Rs
150 after 10 years and value of
'I = interest rate' will be
A. 4.14%
315. Process of calculating B. 0.59%
future value of money from C. 0.69%
present value is classified as D. 0.79%
A. compounding Answer: Option A
B. discounting
C. money value
D. stock value
Answer: Option A
320. Noncash revenues and
noncash charges if it
subtracted from net income is
equal to
316. Type of basic financial A. free cash flow
statements consist of B. retained cash flow
A. balance sheet and income C. net cash flow
statement D. financing cash flow
B. statement of retained earning Answer: Option C
C. statement of cash flows
D. all of above
Answer: Option D
321. An information uses by
investors for expecting future
earnings is all recorded in
317. If common shares A. five years report
outstanding are 50,000,000 B. annual report
and book value per share is Rs C. stock report
19.92 then total common D. exchange report
equity will be Answer: Option B
A. Rs 996,000,000.00
B. Rs 995,000,000.00
C. Rs 992,000,000.00
D. Rs 991,000,000.00
Answer: Option A
24
322. In calculation of net cash
flow, deferred tax payments
are classified as
A. non-cash revenues
B. non-cash charges
C. current liabilities
D. income expense
Answer: Option B
323. Land, buildings, and
factory fixed equipment are
classified as
A. tangible asset
B. non-tangible assets
C. financial asset
D. financial liability
Answer: Option A
324. Rate of return that an
investment provides its
investor is classified as
A. investment return rate
B. internal rate of return
C. international rate of return
D. intrinsic rate of return
Answer: Option B
325. Method of inventory
recording gives lower cost of
goods sold in income
statement is classified as
A. last in first out
B. last out receivable
C. First out receivable
D. First in first out
Answer: Option D
326. Type of interest rates
consist of
A. nominal rates
B. periodic rates
C. effective annual rates
D. all of above
Answer: Option D
327. Future value of interest
if it is calculated once a year is
classified as
A. One time compounding
B. annual compounding
C. semi-annual compounding
D. monthly compounding
Answer: Option B
328. An interest rate which is
paid by money borrower and
charged by lender is
considered as
A. annual rate
B. periodic rate
C. perpetuity rate of return
D. annuity rate of return
Answer: Option B
329. In calculation of time
value of money, 'PMT'
represents
A. present money tracking
B. payment
C. payment money tracking
D. future money payment
Answer: Option B
330. Left side of balance
sheet states the
A. appreciated earnings
B. liabilities
C. assets
D. stocks earnings
Answer: Option B
331. Intangible assets such as
copyrights, trademarks and
patents are applicable for
A. depreciation
25
B. amortization
C. stock amortization
D. perishable assets
Answer: Option B
332. A schedule which shows
interest constitutes reduced
principal and unpaid balance
is considered as
A. repaid schedule
B. depreciated schedule
C. amortization schedule
D. appreciated schedule
Answer: Option C
333. Net income is Rs 2250
and noncash charges are Rs
1150 then net cash flow would
be
A. Rs 1,100.00
B. Rs 3,400.00
C. Rs 2,200.00
D. Rs 3,500.00
Answer: Option A
334. Lottery payoffs and
payment for rental apartments
are examples of
A. lump sum amount
B. deferred annuity
C. annuity due
D. payment fixed series
Answer: Option C
335. Finance company
providing loans at 12% with 2
compounding periods per
year, periodic rate is classified
as
A. 3% per quarter
B. 6% per quarter
C. 6% per year
D. 0.1667 % per year
Answer: Option C

336. Accounts payable,
accruals and notes payables
are listed on balance sheet as
A. accrued liabilities
B. current liabilities
C. accumulated liabilities
D. non-current liabilities
Answer: Option B
337. A loan that is repaid on
monthly, quarterly and annual
basis in equal payments is
classified as
A. amortized loan
B. depreciated loan
C. appreciated loan
D. repaid payments
Answer: Option A
338. An interest rate is 5%,
number of period are 3, and
present value is Rs 100,and
then future value will be
A. 115.76
B. 105.00
C. 110.25
D. 113.56
Answer: Option A
339. A method of inventory
recording which produces
high inventories in balance
sheet is classified as
A. First out receivable
B. First in first out
C. Last in first out
D. last out receivable
Answer: Option B
340. Non cash revenues are
Rs 500,000 and net income is
Rs 950,000 then net cash flow
would be
A. Rs 475,000.00
B. Rs 485,000.00
C. Rs 1,450,000.00
D. Rs 450,000.00
Answer: Option D
341. Cash and equivalents,
inventories and accounts
receivables are classified as
A. assets on balance sheet
B. liabilities on balance sheet
C. earnings on income statement
D. payments on income
statement
Answer: Option A
342. In situation of
bankruptcy, stock which is
recorded above common stock
and below debt account is
A. debt liabilities
B. preferred stock
C. hybrid stock
D. common liabilities
Answer: Option B
343. If security pays Rs 5,000
in 20 years with 7% annual
interest rate, PV of security by
using formula is
A. Rs 1,290.10
B. Rs 1,292.10
C. Rs 1,295.10
D. Rs 1,297.10
Answer: Option B
344. An interest rate which is
quoted by brokers, banks and
other financial institutions is
classified as
26
A. annuity rate
B. perpetuity rate
C. nominal rate
D. external rate of return
Answer: Option C
345. Company who sells
products to customer without
demanding immediate
payment but record it in
balance sheet as
A. account payable
B. account receivable
C. account equivalent
D. account investment
Answer: Option B
346. Nominal rate which is
quoted to consumers on loans
is considered as
A. annual percentage rate
B. annual rate of return
C. loan rate of return
D. local rate of return
Answer: Option A
347. An inventory recording
in balance sheet includes
A. First in first out
B. Last in first out
C. last in last out
D. Both A and B
Answer: Option D
348. Values recorded as
determined in marketplace are
considered as
A. market values
B. book values
C. appreciated values
D. depreciated values
Answer: Option A

349. A type of security
payment in which payments
are made at equal intervals of
time and each payment
amount is same is classified as
A. fixed interval investment
B. fixed payment investment
C. annuity
D. lump sum amount
Answer: Option C
350. Financial securities that
can be converted into cash at
closing to their book value
price are classified as
A. inventories
B. short-term investments
C. cash equivalents
D. long-term investments
Answer: Option C
351. Discounted cash flow
analysis is also classified as
A. time value of stock
B. time value of money
C. time value of bonds
D. time value of treasury bonds
Answer: Option B
352. Prices of bonds will be
decreased if an interest rates
A. rises
B. declines
C. equals
D. none of above
Answer: Option A
353. Right side of balance
sheet states the
A. appreciated earnings
B. liabilities
C. assets
D. stocks earnings
Answer: Option C
354. Wages and salaries of
employees which company
owns in this accounts are
called
A. accrued expenses
B. accruals accounts
C. Both A and B
D. zero liabilities
Answer: Option C
355. Securities future value is
Rs 1,000,000 and present value
of securities is Rs 500,000 with
an interest rate of 4.5%, 'N'
will be
A. 16.7473 years
B. 0.0304 months
C. 15.7473 years
D. 0.7575 years
Answer: Option C
356. If payment of security is
paid as Rs 100 at end of year
for three years, it is an
example of
A. fixed payment investment
B. lump sum amount
C. fixed interval investment
D. annuity
Answer: Option D
357. Payment of security if it
is made at end of each period
such as beginning of year is
classified as
A. annuity due
B. payment fixed series
C. ordinary annuity
D. deferred annuity
Answer: Option A
27
358. Net worth is also called
A. asset net of liabilities
B. liabilities net of assets
C. earnings net on assets
D. liabilities net of earnings
Answer: Option A
359. An annual rate of 16% if
quoted by credit card issuer
usually a bank is classified as
A. loan rate of return
B. local rate of return
C. annual percentage rate
D. annual rate of return
Answer: Option C
360. Value of payment is Rs
25 and an interest rate is 2%,
then present value will be
A. Rs 12.54
B. Rs 12,500.00
C. Rs 12,504.00
D. Rs 8,400.00
Answer: Option C
361. Collection of net income,
amortization and depreciation
is divided by common shares
outstanding to calculate
A. cash flow of financing
activities
B. cash flow per share
C. cash flow of investment
D. cash flow of operations
Answer: Option B
362. In a statement of cash
flows, a company investing in
short-term financial
investments and in fixed assets
results in
A. increased cash
B. decreased cash
C. increased liabilities
D. increased equity
Answer: Option B
363. Future value of annuity
FVA(ordinary) is, if deposited
value is Rs 100 and earn 5%
every year of total three years
will be
A. Rs 315.25
B. Rs 331.01
C. Rs 99.49
D. Rs 318.25
Answer: Option A
364. Total common equity
divided by common shares
outstanding which is used to
calculate
A. book value of share
B. market value of shares
C. earning per share
D. dividends per share
Answer: Option A
365. Prices of bonds will be
increased if interest rates
A. equals
B. lump sum declines
C. rises
D. declines
Answer: Option D
366. Earnings that are not
paid as dividends to
stockholders and have
cumulative amount are
classified as
A. non-paid earnings
B. common earnings
C. retained earnings
D. preferred earnings
Answer: Option C
367. In time value of money,
periodic rate is
A. not shown on timeline
B. shown on timeline
C. multiplied on timeline
D. divided on timeline
Answer: Option B
368. Claim against assets are
represented by
A. saved earning
B. retained earnings
C. maintained earnings
D. saving account earning
Answer: Option B
369. Rate charged by bank
12.5% on credit loans and 3%
semi-annually on instalment
loans is considered as
A. periodic rate
B. perpetuity rate of return
C. annual rate
D. annuity rate of return
Answer: Option A
370. Dividends paid to
common shareholders and
divided by common shares
outstanding are equals to
A. earning per share
B. dividends per share
C. book value of share
D. market value of shares
Answer: Option B
371. Future value of interest
if it is calculated two times a
year can be a classified as
28
A. semi-annual discounting
B. annual discounting
C. annual compounding
D. semi-annual compounding
Answer: Option D
372. Payment if it is divided
with interest rate will be
formula of
A. future value of perpetuity
B. present value of perpetuity
C. due perpetuity
D. deferred perpetuity
Answer: Option B
373. An earning before
interest, taxes, depreciation
and amortization are
calculated by
A. subtracting operating cost
from net sales
B. subtracting net sales from
operating costs
C. adding operating cost and net
sales
D. adding interest and taxes
Answer: Option A
374. Until word of preferred
is used, an equity in balance
sheet is treated as
A. common equity
B. preferred equity
C. due equity
D. common perpetuity
Answer: Option A
375. Total common equity Rs
996,000,000 and shares
outstanding 50,000,000 then
book value per share would be
A. Rs 0.05
B. Rs 15.00
C. Rs 19.92
D. Rs 14.00
Answer: Option C
376. Total amount of
depreciation charged on long
term assets is classified as
A. accumulated depreciation
B. depleted depreciation
C. accumulated appreciation
D. accumulated appreciation
schedule
Answer: Option A
377. rate which is divided by
compounding periods to
calculate periodic rate must be
A. annuity return
B. deferred annuity return
C. nominal rate
D. semi-annual discount rate
Answer: Option C
378. In calculation of time,
value of money, ''N
''represents
A. number of payment periods
B. number of investment
C. number of instalments
D. number of premium received
Answer: Option A
379. If deposited money Rs
10,000 in bank pays interest
10% annually, an amount
after five years will be
A. Rs 16,105.14
B. Rs 16,110.14
C. Rs 16,115.14
D. Rs 16,505.14
Answer: Option A
380. Student loans,
mortgages and car loans are
examples of
A. lump sum amount
B. deferred annuity
C. annuity due
D. payment fixed series
Answer: Option B
381. An annuity with an
extended life is classified as
A. extended life
B. perpetuity
C. deferred perpetuity
D. due perpetuity
Answer: Option B
382. Periodic rate if it is
multiplied with per year
number of compounding
periods is called
A. extrinsic rate of return
B. intrinsic rate of return
C. annual rate of return
D. nominal annual rate
Answer: Option D
383. Net income and
depreciation is Rs 313,650,000
and common shares
outstanding are 55,000,000
then cash flow per share
would be
A. Rs 5.70
B. Rs 6.70
C. Rs 7.70
D. Rs 8.70
Answer: Option A
384. Finance company
providing loans at 3% with
five compounding periods per
year, nominal annual rate is
classified as
29
A. 15.00%
B. 0.60%
C. 10.00%
D. 1.67%
Answer: Option A
385. Values of assets
purchased or liabilities
recorded as recorded by
bookkeepers are considered as
A. appreciated values
B. depreciated values
C. market values
D. book values
Answer: Option D
386. A stock which is hybrid
and works as a cross between
debt and common stock is
considered as
A. hybrid stock
B. common liabilities
C. debt liabilities
D. preferred stock
Answer: Option D
387. Paid dividends to
common stockholders Rs
67,600,000 and common
shares outstanding 55,000,000
then dividend per share will be
A. Rs 1.23
B. Rs 0.81
C. Rs 2.12
D. Rs 2.78
Answer: Option A
388. Procedure of finding
present values in time value of
money is classified as
A. compounding
B. discounting
C. money value
D. stock value
Answer: Option B B. policy of dividends
C. policy of investment
D. all of above
Answer: Option D 398. If future return on
common stock is 14% and rate
389. In uneven cash flow, on T-bonds is 5% then current
'IRR' is an abbreviation of an market risk premium will be
A. internal rate of return A. 19.00%
B. international rate of return 394. A risk associated with B. 9.00%
C. intrinsic rate of return project and way considered by C. Rs 9
D. investment return rate well diversified stockholder is D. Rs 19
Answer: Option A classified as Answer: Option B
A. expected risk
B. beta risk
C. industry risk
D. returning risk
390. A company who issues Answer: Option B 399. Cost of capital is equal
bonds or stocks in result to required return rate on
raised funds which finally equity in case if investors are
A. increases liabilities only
B. increases equity A. valuation manager
C. increases cash 395. Cost of common stock is B. common stockholders
D. decreases cash 13% and bond risk premium C. asset seller
Answer: Option C is 5% then bond yield would D. equity dealer
be Answer: Option B
A. 20.00%
B. 2.60%
C. 8.00%
391. During planning period, D. 18.00%
a marginal cost for raising a Answer: Option C 400. Interest rate is 12% and
new debt is classified as tax savings (1-0.40) then after-
A. debt cost tax component cost of debt
B. relevant cost will be
C. borrowing cost A. 7.20%
D. embedded cost 396. Variability for expected B. 7.40%
Answer: Option B returns for projects is C. 17.14%
classified as D. 17.24%
A. expected risk Answer: Option A
B. stand-alone risk
C. variable risk
392. Cost of common stock is D. returning risk
14% and bond risk premium Answer: Option B
is 9% then bond yield will be 401. Retention ratio is 0.60
A. 1.56% and return on equity is 15.5%
B. 5.00% then growth retention model
C. 23.00% would be
D. 64.28% 397. Cost of common stock is A. 14.90%
Answer: Option B 16% and bond yield is 9% B. 25.84%
then bond risk premium C. 16.10%
would be D. 9.30%
A. 7.00% Answer: Option D
B. 9.00%
393. In weighted average cost C. 1.78%
of capital, a company can D. 25.00%
affect its capital cost through Answer: Option A
A. policy of capital structure

30
402. Method uses for an
estimation of cost of equity is
classified as
A. market cash flow
B. future cash flow method
C. discounted cash flow method
D. present cash flow method
Answer: Option C
403. An attempt to make
correction by adjusting
historical beta to make it
closer to an average beta is
classified as
A. adjusted stock
B. adjusted beta
C. adjusted coefficient
D. adjusted risk
Answer: Option B
404. Method in which
company finds other
companies considered in same
line of business to evaluate
divisions is classified as
A. pure play method
B. same play method
C. division line method
D. single product method
Answer: Option A
405. Bond risk premium is
added in to bond yield to
calculate the
A. cost of American option
B. cost of European option
C. cost of common stock
D. cost of preferred stock
Answer: Option C
406. Stock selling price is Rs
45, an expected dividend is Rs
10 and an expected growth
rate is 8% then cost of
common stock would be
A. 55.00%
B. 35.00%
C. 30.00%
D. 30.22%
Answer: Option D
407. A type of beta which
incorporates about company
such as changes in capital
structure is classified as
A. industry beta
B. market beta
C. subtracted beta
D. fundamental beta
Answer: Option D
408. Dividend per share is Rs
18 and sell it for Rs 122 and
floatation cost is Rs 4 then
component cost of preferred
stock will be
A. 15.25%
B. 0.1525 times
C. 15.25
D. 0.15%
Answer: Option A
409. In weighted average
capital, capital structure
weights estimation does not
rely on value of
A. investor's equity
B. market value of equity
C. book value of equity
D. stock equity
Answer: Option C
31
410. Interest rates, tax rates
and market risk premium are
factors which an/a
A. industry cannot control
B. industry cannot control
C. firm must control
D. firm cannot control
Answer: Option D
411. For each component of
capital, a required rate of
return is considered as
A. component cost
B. evaluating cost
C. asset cost
D. asset depreciation value
Answer: Option A
412. If payout ratio is 0.45
then retention ratio will be
A. 0.55
B. 1.45
C. 1.82
D. 0.45
Answer: Option A
413. Stock selling price is Rs
35, expected dividend is Rs 5
and expected growth rate is
8% then cost of common stock
would be
A. 40.00%
B. 22.29%
C. 14.28%
D. 80.00%
Answer: Option B
414. Retention ratio is 0.55
and return on equity is 12.5%
then growth retention model
would be
A. 11.95%
B. 6.88%
C. 13.05%
D. 22.72%
Answer: Option B
415. Preferred dividend is
divided by preferred stock
price multiply by (1-floatation
cost) is used to calculate
A. transaction cost of preferred
stock
B. financing of preferred stock
C. weighted cost of capital
D. component cost of preferred
stock
Answer: Option D
416. Stock selling price is Rs
65, expected dividend is Rs 20
and cost of common stock is
42% then expected growth
rate will be
A. 0.1123 times
B. 11.23%
C. 11.23 times
D. Rs 11.23
Answer: Option B
417. In retention growth
model, percent of net income
firms usually pay out as
shareholders dividends is
classified as
A. payout ratio
B. payback ratio
C. growth retention ratio
D. present value of ratio
Answer: Option A
418. In weighted average cost
of capital, rising in interest
rate leads to
A. increase in cost of debt
B. increase capital structure
C. decrease in cost of debt
D. decrease capital structure
Answer: Option A 423. Premium which is
considered as difference of
expected return on common
stock and current yield on
Treasury bonds is called
419. Bond risk premium is A. current risk premium
3% and bond yield is 10.2% B. past risk premium
then cost of common stock will C. beta premium
be D. expected premium
A. 3.40% Answer: Option A
B. 13.20%
C. 7.20%
D. 30.60%
Answer: Option B
424. An interest rate which is
paid by firm as soon as it
issues debt is classified as pre-
tax
420. Cost of new debt or A. term structure
marginal debt is also classified B. market premium
as C. risk premium
A. historical rate D. cost of debt
B. embedded rate Answer: Option D
C. marginal rate
D. Both A and B
Answer: Option D
425. Beta which is estimated
as regression slope coefficient
is classified as
421. Bond yield is 12% and A. historical beta
bond risk premium is 4.5% B. market beta
then cost of common stock C. coefficient beta
would be D. risky beta
A. 37.50% Answer: Option A
B. 7.50%
C. 16.50%
D. 2.67%
Answer: Option C
426. In weighted average cost
of capital, capital components
are funds that usually offer by
A. stock market
422. Forecast by analysts, B. investors
retention growth model and C. capitalist
historical growth rates are D. exchange index
methods used for an Answer: Option B
A. estimate future growth
B. estimate option future value
C. estimate option present value
D. estimate growth ratio
Answer: Option A 427. Cost which is used to
calculate weighted average
cost of capital is classified as
A. weighted cost of capital
32
B. component cost of preferred
stock
C. transaction cost of preferred
stock
D. financing of preferred stock
Answer: Option B
428. Special situation in
which large projects are
financed by with and
securities claims on project's
cash flow is classified as
A. claimed securities
B. project financing
C. stock financing
D. interest cost
Answer: Option B
429. Type of cost which is
used to raise common equity
by reinvesting internal
earnings is classified as
A. cost of mortgage
B. cost of common equity
C. cost of stocks
D. cost of reserve assets
Answer: Option B
430. If future return on
common stock is 19% and rate
on T-bonds is 11% then
current market risk premium
will be
A. Rs 30.00
B. 30.00%
C. 8.00%
D. Rs 8.00
Answer: Option C
431. Historical growth rates,
analysis forecasts and
retention growth model are
approaches to estimate
A. present value of gain
B. growth rate
C. growth gain
D. discounted gain
Answer: Option B
432. In weighted average cost
of capital, cost of capital which
is risk adjusted and developed
for each category of
A. long-term projects
B. industry [industrial] projects
C. divisional projects
D. short-term projects
Answer: Option B
433. In retention growth
model, payout ratio is
subtracted from one to
calculate
A. present value ratio
B. future value ratio
C. retention ratio
D. growth ratio
Answer: Option C
434. If retention rate is 0.68
then payout rate will be
A. 1.47
B. 1.68
C. 0.32
D. 0.68
Answer: Option C
435. Cost of common stock is
15% and bond yield is 10.5%
then bond risk premium will
be
A. 1.43%
B. 8.50%
C. 25.50%
D. 4.50%
Answer: Option D
33
436. Cost of equity which is
raised by reinvesting earnings
internally must be higher than
the
A. cost of initial offering
B. cost of new common equity
C. cost of preferred equity
D. cost of floatation
Answer: Option B
437. Dividend per share is Rs
15 and sell it for Rs 120 and
floatation cost is Rs 3.0 then
component cost of preferred
stock will be
A. 12.82 times
B. 0.1282 times
C. 12.82%
D. Rs 12.82
Answer: Option C
438. In pure play method, a
company can calculate its own
cost of capital with help of
averaging an
A. other company capital policy
B. other company beta
C. other company cost
D. other division cost
Answer: Option B
439. Capital budgeting
decisions are analyzed with
help of weighted average and
for this purpose
A. component cost is used
B. common stock value is used
C. cost of capital is used
D. asset valuation is used
Answer: Option C
440. A formula of after-tax
component cost of debt is
A. interest rate-tax savings
B. marginal tax-required return
C. interest rate + tax savings
D. borrowing cost + embedded
cost
Answer: Option A
441. Risk free rate is
subtracted from expected
market return is considered as
A. country risk
B. diversifiable risk
C. equity risk premium
D. market risk premium
Answer: Option C
442. Type of variability in
which a project contributes in
return of company is
considered as
A. variable risk
B. within firm risk
C. corporate risk
D. Both B and C
Answer: Option D
443. Rate of required return
by debt holders is used for
estimation the
A. cost of debt
B. cost of equity
C. cost of internal capital
D. cost of reserve assets
Answer: Option A
444. A project whose cash
flows are more than capital
invested for rate of return
then net present value will be
A. positive
B. independent
C. negative
D. zero
Answer: Option A
445. In mutually exclusive
projects, project which is
selected for comparison with
others must have
A. higher net present value
B. lower net present value
C. zero net present value
D. all of above
Answer: Option A
446. Relationship between
Economic Value Added (EVA)
and Net Present Value (NPV)
is considered as
A. valued relationship
B. economic relationship
C. direct relationship
D. inverse relationship
Answer: Option C
447. An uncovered cost at
start of year is Rs 200, full
cash flow during recovery
year is Rs 400 and prior years
to full recovery is 3 then
payback would be
A. 5 years
B. 3.5 years
C. 4 years
D. 4.5 years
Answer: Option B
448. In capital budgeting,
positive net present value
results in
A. negative economic value
added
B. positive economic value
added
C. zero economic value added
34
D. percent economic value
added
Answer: Option B
449. An uncovered cost at
start of year is divided by full
cash flow during recovery
year then added in prior years
to full recovery for calculating
A. original period
B. investment period
C. payback period
D. forecasted period
Answer: Option C
450. In cash flow analysis,
two projects are compared by
using common life is classified
as
A. transaction approach
B. replacement chain approach
C. common life approach
D. Both B and C
Answer: Option D
451. Other factors held
constant, but lesser project
liquidity is because of
A. shorter payback period
B. greater payback period
C. less project return
D. greater project return
Answer: Option B
452. In capital budgeting, an
internal rate of return of
project is classified as its
A. external rate of return
B. internal rate of return
C. positive rate of return
D. negative rate of return
Answer: Option B

453. In independent projects
evaluation, results of internal
rate of return and net present
value lead to
A. cash flow decision
B. cost decision
C. same decisions
D. different decisions
Answer: Option C
454. In internal rate of
returns, discount rate which
forces net present values to
become zero is classified as
A. positive rate of return
B. negative rate of return
C. external rate of return
D. internal rate of return
Answer: Option D
455. Projects which are
mutually exclusive but
different on scale of
production or time of
completion then the
A. external return method
B. net present value of method
C. net future value method
D. internal return method
Answer: Option B
456. Graph which is plotted
for projected net present value
and capital rates is called
A. net loss profile
B. net gain profile
C. net future value profile
D. net present value profile
Answer: Option D
457. A modified internal rate
of return is considered as
present value of costs and is
equal to
A. PV of hurdle rate
B. FV of hurdle rate
C. PV of terminal value
D. FV of terminal value
Answer: Option C
458. Set of projects or set of
investments usually maximize
firm value is classified as
A. optimal capital budget
B. minimum capital budget
C. maximum capital budget
D. greater capital budget
Answer: Option A
459. A point where profile of
net present value crosses
horizontal axis at plotted
graph indicates project
A. costs
B. cash flows
C. internal rate of return
D. external rate of return
Answer: Option C
460. Modified rate of return
and modified internal rate of
return with exceed cost of
capital if net present value is
A. positive
B. negative
C. zero
D. one
Answer: Option A
461. Payback period in which
an expected cash flows are
discounted with help of
project cost of capital is
classified as
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A. discounted payback period
B. discounted rate of return
C. discounted cash flows
D. discounted project cost
Answer: Option A
462. In alternative
investments, constant cash
flow stream is equal to initial
cash flow stream in approach
which is classified as
A. greater annual annuity
method
B. equivalent annual annuity
C. lesser annual annuity method
D. zero annual annuity method
Answer: Option B
463. In capital budgeting, a
negative net present value
results in
A. zero economic value added
B. percent economic value
added
C. negative economic value
added
D. positive economic value
added
Answer: Option C
464. Number of years
forecasted to recover an
original investment is
classified as
A. payback period
B. forecasted period
C. original period
D. investment period
Answer: Option A
465. In capital budgeting,
term of bond which has great
sensitivity to interest rates is
A. long-term bonds
B. short-term bonds
C. internal term bonds
D. external term bonds
Answer: Option A
466. Process in which
managers of company identify
projects to add value is
classified as
A. capital budgeting
B. cost budgeting
C. book value budgeting
D. equity budgeting
Answer: Option A
467. A discount rate which
equals to present value of TV
to project cost present value is
classified as
A. negative internal rate of
return
B. modified internal rate of
return
C. existed internal rate of return
D. relative rate of return
Answer: Option B
468. An uncovered cost at
start of year is Rs 300, full
cash flow during recovery
year is Rs 650 and prior years
to full recovery is 4 then
payback would be
A. 3.46 years
B. 2.46 years
C. 5.46 years
D. 4.46 years
Answer: Option D
469. Project whose cash flows
are sufficient to repay capital
invested for rate of return
then net present value will be
A. negative
B. zero
C. positive
D. independent
Answer: Option B
470. Present value of future
cash flows is Rs 2000 and an
initial cost is Rs 1100 then
profitability index will be
A. 55.00%
B. 1.82
C. 0.55
D. 1.82%
Answer: Option B
471. Profitability index in
capital budgeting is used for
A. negative projects
B. relative projects
C. evaluate projects
D. earned projects
Answer: Option C
472. Other factors held
constant, greater project
liquidity is because of
A. less project return
B. greater project return
C. shorter payback period
D. greater payback period
Answer: Option C
473. In calculation of internal
rate of return, an assumption
states that received cash flow
from project must
A. be reinvested
B. not be reinvested
C. be earned
D. not be earned
Answer: Option A
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474. In capital budgeting,
number of non-normal cash
flows have internal rate of
returns are
A. one
B. multiple
C. accepted
D. non-accepted
Answer: Option B
475. An internal rate of
return in capital budgeting
can be modified to make it
representative of
A. relative outflow
B. relative inflow
C. relative cost
D. relative profitability
Answer: Option D
476. Situation in which firm
limits expenditures on capital
is classified as
A. optimal rationing
B. capital rationing
C. marginal rationing
D. transaction rationing
Answer: Option B
477. Initial cost is Rs 5000
and probability index is 3.2
then present value of cash
flows is
A. Rs 8,200.00
B. Rs 16,000.00
C. Rs 10,000.00
D. Rs 1,562.50
Answer: Option B
478. A project which have
one series of cash inflows and
results in one or more cash
outflows is classified as
A. abnormal costs
B. normal cash flows
C. abnormal cash flow
D. normal costs
Answer: Option B
479. Present value of future
cash flows is divided by an
initial cost of project to
calculate
A. negative index
B. exchange index
C. project index
D. profitability index
Answer: Option D
480. If net present value is
positive then profitability
index will be
A. greater than two
B. equal to
C. less than one
D. greater than one
Answer: Option D
481. Cash flows occurring
with more than one change in
sign of cash flow are classified
as
A. non-normal cash flow
B. normal cash flow
C. normal costs
D. non-normal costs
Answer: Option A
482. First step in calculation
of net present value is to find
out
A. present value of equity
B. future value of equity
C. present value cash flow
D. future value of cash flow
Answer: Option C
483. Situation in which one
project is accepted while
rejecting another project in
comparison is classified as
A. present value consent
B. mutually exclusive
C. mutual project
D. mutual consent
Answer: Option B
484. Sum of discounted cash
flows is best defined as
A. technical equity
B. defined future value
C. project net present value
D. equity net present value
Answer: Option C
485. Life that maximizes net
present value of an asset is
classified as
A. minimum life
B. present value life
C. economic life
D. transaction life
Answer: Option C
486. If two independent
projects having hurdle rate
then both projects should
A. be accepted
B. not be accepted
C. have capital acceptance
D. have return rate acceptance
Answer: Option A
487. Cash outflows are costs
of project and are represented
by
A. negative numbers
B. positive numbers
37
C. hurdle number
D. relative number
Answer: Option A
488. In capital budgeting, two
projects who have cost of
capital as 12% is classified as
A. hurdle rate
B. capital rate
C. return rate
D. budgeting rate
Answer: Option A
489. Cash flow which starts
negative then positive than
again positive cash flow is
classified as
A. normal costs
B. non-normal costs
C. non-normal cash flow
D. normal cash flow
Answer: Option C
490. In estimating value of
cash flows, compounded
future value is classified as its
A. terminal value
B. existed value
C. quit value
D. relative value
Answer: Option A
491. In capital budgeting, a
technique which is based upon
discounted cash flow is
classified as
A. net present value method
B. net future value method
C. net capital budgeting method
D. net equity budgeting method
Answer: Option A

492. An increase in marginal
cost of capital and capital
rationing are two arising
complications of
A. maximum capital budget
B. greater capital budget
C. optimal capital budget
D. minimum capital budget
Answer: Option C
493. An initial cost is Rs 6000
and probability index is 5.6
then present value of cash
flows will be
A. Rs 25,000.00
B. Rs 28,000.00
C. Rs 33,600.00
D. Rs 30,000.00
Answer: Option C
494. In large expansion
programs, increased riskiness
and floatation cost associated
with project can cause
A. rise in marginal cost of
capital
B. fall in marginal cost of capital
C. rise in transaction cost of
capital
D. rise in transaction cost of
capital
Answer: Option A
495. Cash inflows are
revenues of project and are
represented by
A. hurdle number
B. relative number
C. negative numbers
D. positive numbers
Answer: Option D
496. Present value of future
cash flows is Rs 4150 and an
initial cost is Rs 1300 then
profitability index will be
A. 3.00%
B. 3.19
C. 0.31 times
D. Rs 5,450.00
Answer: Option B
497. Project whose cash flows
are less than capital invested
for required rate of return
then net present value will be
A. negative
B. zero
C. positive
D. independent
Answer: Option A
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498. A type of project whose
cash flows would not depend
on each other is classified as
A. project net gain
B. independent projects
C. dependent projects
D. net value projects
Answer: Option B
499. Net present value,
profitability index, payback
and discounted payback are
methods to
A. evaluate cash flow
B. evaluate projects
C. evaluate budgeting
D. evaluate equity
Answer: Option B
500. Required increasing in
current assets and an
increasing in current liabilities
is subtracted to calculate
A. change in net working capital
38
B. change in current assets
C. change in current liabilities
D. change in depreciation
Answer: Option A
501. Cash flows that could be
generated from an owned
asset by company but not use
in project are classified as
A. occurred cost
B. mean cost
C. opportunity costs
D. weighted cost
Answer: Option C
502. In capital budgeting,
cost of capital is used as
discount rate and is based on
pre-determines
A. cost of inflation
B. cost of debt and equity
C. cost of opportunity
D. cost of transaction
Answer: Option B
503. Economists consider
effects of started project on
other parts of company or on
environment of company is
called
A. externalities
B. foreign effects
C. weighted effects
D. opportunity effects
Answer: Option A
504. Situation in which
company replaces existing
assets with new assets is
classified as
A. replacement projects
B. new projects
C. existing projects
D. internal projects
Answer: Option A
505. Relevant cash flow
which company expects when
its will implement project is
classified as
A. irrelevant cash flow
B. relevant cash flow
C. incremental cash flow
D. decrease cash flow
Answer: Option C
506. Free cash flow is Rs
12000, an operating cash flow
is Rs 4000, an investment
outlay cash flow is Rs 5000
then salvage cash flow would
be
A. -Rs 21,000.00
B. Rs 21,000.00
C. -Rs 3,000.00
D. Rs 3,000.00
Answer: Option D
507. Cash flows that should
be considered for decision in
hand are classified as
A. relevant cash flows
B. irrelevant cash flows
C. marginal cash flows
D. transaction cash flows
Answer: Option A
508. Nominal interest rates
and nominal cash flows are
usually reflected the
A. inflation effects
B. opportunity effects
C. equity effects
D. debt effects
Answer: Option A
509. Net investment in
operating capital is Rs 5000
and net operating profit after
taxes is Rs 8000 then free cash
flow would be
A. Rs 13,000.00
B. -Rs 3,000.00
C. Rs 3,000.00
D. -Rs 13,000.00
Answer: Option C
510. Situation in which new
business reduces an existing
business of firm is classified as
A. non-cannibalization effect
B. cannibalization effect
C. external effect
D. internal effect
Answer: Option B
511. In cash flow estimation
and risk analysis, real rate will
be equal to nominal rate if
there is
A. no inflation
B. high inflation
C. no transactions
D. no acceleration
Answer: Option A
512. In cash flow estimation,
depreciation shelters
company's income from
A. expansion
B. salvages
C. taxation
D. discounts
Answer: Option C
513. Weighted average cost of
debt, preferred stock and
common equity is classified as
A. cost of salvage
39
B. cost of interest
C. cost of taxation
D. cost of capital
Answer: Option D
514. An investment outlay
cash flow is Rs 4000, operating
cash flow is Rs 1000 and
salvage cash flow is Rs 5000
then free cash flow would be
A. Rs 10,000.00
B. Rs 8,000.00
C. Rs 0.00
D. none of above
Answer: Option A
515. Rate of return which is
required to satisfy
stockholders and debt holders
is classified as
A. weighted average cost of
interest
B. weighted average cost of
capital
C. weighted average salvage
value
D. mean cost of capital
Answer: Option B
516. Net investment in
operating capital is Rs 7000
and net operating profit after
taxes is Rs 11,000 then free
cash flow will be
A. -Rs 18,000.00
B. Rs 18,000.00
C. -Rs 4,000.00
D. Rs 4,000.00
Answer: Option D
517. Free cash flow is Rs 521. Net operating profit C. Rs 14,000.00
17000 and net investment in after taxes is Rs 4500, net D. -Rs 2,000.00
operating capital is Rs 10000 investment in operating Answer: Option B
then net operating profit after capital is Rs 8500 and then
taxes would be free cash flow would be
A. Rs 7,000.00 A. -Rs 4,000.00
B. Rs 27,000.00 B. Rs 4,000.00
C. -Rs 27,000.00 C. -Rs 18,000.00 526. Real rate expected cash
D. -Rs 7,000.00 D. Rs 18,000.00 flows and nominal rate
Answer: Option B Answer: Option A expected cash flows must be
A. accelerated
B. equal
C. different
D. inflated
518. An investment outlay 522. Net investment in Answer: Option B
cash flow is Rs 2000, an operating capital is subtracted
operating cash flow is Rs 1500 from net operating profit after
and salvage cash flow is Rs taxes to calculate
3000 then free cash flow would A. relevant inflows
be B. free cash flow 527. Double declining
A. Rs 500.00 C. relevant outflows balance method and sum of
B. Rs 2,500.00 D. cash outlay years digits are included in
C. Rs 650.00 Answer: Option B A. yearly method
D. Rs 6,500.00 B. single methods
Answer: Option D C. double methods
D. accelerated methods
Answer: Option D
523. Project which is started
by firm for increasing sales is
519. Free cash flow is Rs classified as
15000 and net investment in A. new expansion project
operating capital is Rs 9000 B. old expanded project 528. Free cash flow is Rs
then net operating profit after C. firm borrowing project 15000, operating cash flow is
taxes will be D. product line selection Rs 3000, investment outlay
A. Rs 24,000.00 Answer: Option A cash flow is Rs 5000 then
B. Rs 6,000.00 salvage cash flow will be
C. -Rs 6,000.00 A. Rs 17,000.00
D. -Rs 24,000.00 B. -Rs 17,000.00
Answer: Option A C. Rs 7,000.00
524. Real interest rate and D. -Rs 7,000.00
real cash flows do not include Answer: Option C
A. equity effects
B. debt effects
520. In cash flow estimation, C. inflation effects
depreciation is considered as D. opportunity effects
A. cash charge Answer: Option C 529. An operating cash flows
B. noncash charge is Rs 12000 and gross fixed
C. cash flow discounts asset expenditure is Rs 5000
D. net salvage discount then free cash flow will be
Answer: Option B A. -Rs 7,000.00
525. Gross fixed asset B. Rs 7,000.00
expenditures is Rs 6000 and C. Rs 17,000.00
free cash flow is Rs 8000 then D. -Rs 17,000.00
operating cash flows will be Answer: Option B
A. -Rs 14,000.00
B. Rs 2,000.00

40

530. Cost which has occurred
already and not affected by
decisions is classified as
A. sunk cost
B. occurred cost
C. weighted cost
D. mean cost
Answer: Option A
531. An analysis and
estimation of cash flows
include
A. input data and key output
B. depreciation schedule
C. net salvage values
D. all of above
Answer: Option D
532. Second mortgages
pledged against bond's
security are referred as
A. loan mortgages
B. medium mortgages
C. senior mortgages
D. junior mortgages
Answer: Option D
533. Long period of bond
maturity leads to
A. more price change
B. stable prices
C. standing prices
D. mature prices
Answer: Option A
534. If coupon rate is equal to
going rate of interest then
bond will be sold
A. at par value
B. below its par value
C. more than its par value
D. seasoned par value
Answer: Option A
535. Falling interest rate
leads change to bondholder
income which is
A. reduction in income
B. increment in income
C. matured income
D. frequent income
Answer: Option A
536. Bonds issued by
corporations and exposed to
default risk are classified as
A. corporation bonds
B. default bonds
C. risk bonds
D. zero risk bonds
Answer: Option A
537. Treasury bonds are
exposed to additional risks
that are included
A. reinvestment risk
B. interest rate risk
C. investment risk
D. Both A and B
Answer: Option D
538. If bond's call provision
is practiced in first year of
issuance then an additional
payment is classified as
A. issuance provision
B. bond provision
C. call provision
D. First provision
Answer: Option C
539. Reinvestment risk of
bonds is higher on
41
A. short maturity bonds
B. high maturity bonds
C. high premium bonds
D. high inflated bonds
Answer: Option A
540. Bonds that have high
liquidity premium are usually
have
A. inflated trading
B. default free trading
C. less frequently traded
D. frequently traded
Answer: Option C
541. Bond which is offered
below its face value is
classified as
A. present value bond
B. original issue discount bond
C. coupon issued bond
D. discounted bond
Answer: Option B
542. Risk of fall in income
due to fall in interest rates in
future is classified as
A. income risk
B. investment risk
C. reinvestment risk
D. mature risk
Answer: Option C
543. Redemption option
which protects investors
against rise in interest rate is
considered as
A. redeemable at deferred
B. redeemable at par
C. redeemable at refund
D. redeemable at finding
Answer: Option B

544. Payment divided by par
value is classified as
A. divisible payment
B. coupon payment
C. par payment
D. per period payment
Answer: Option B
545. An official entity that
represents bondholders and
ensures stated rules in
indenture is classified as
A. trustee
B. trust
C. stated entity
D. owner entity
Answer: Option A
546. An annual interest
payment divided by current
price of bond is considered as
A. current yield
B. maturity yield
C. return yield
D. earning yield
Answer: Option A
547. If coupon rate is more
than current rate of interest
then bond will be sold
A. More than its par value
B. Seasoned par value
C. At par value
D. Below its par value
Answer: Option A
548. Call provision practiced
by company which states that
call price will be paid is
classified as
A. super refund provision
B. super put redemption
C. make-whole call provision
D. super call provision
Answer: Option C
549. Difference between
bond's yield and any other
security yield having same
maturities is considered as
A. maturity spread
B. bond spread
C. yield spread
D. interest spread
Answer: Option B
550. Protective covenant
devised in market to reduce
event risk and to control debt
cost is classified as
A. super poison covenant
B. super poison put
C. super poison call
D. super poison redemption
Answer: Option B
551. Coupon rate of
convertible bond is
A. higher
B. lower
C. variable
D. stable
Answer: Option B
552. Rate denoted as r* is
best classified as
A. real risk-free interest rate
B. real-risk free nominal rate
C. real-risk free quoted rate
D. real-risk free nominal
premium
Answer: Option A
42
553. An outstanding bonds
are also classified as
A. standing bonds
B. outdated bonds
C. dated bonds
D. seasoned bonds
Answer: Option D
554. An inflation rate
includes in bond's interest
rates is one which is inflation
rate
A. at bond issuance
B. expected in future
C. expected at time of maturity
D. expected at deferred call
Answer: Option B
555. A premium charged by
lenders for securities that
cannot be converted into cash
is classified as
A. required premium
B. liquidity premium
C. marketability premium
D. Both B and C
Answer: Option D
556. An unsecured bond that
provides no lien against
property as security for bond
obligation is classified as
A. secured bond
B. debenture
C. obligation bond
D. specific bond
Answer: Option B
557. Unsecured bonds which
is designated for only notes
payable or all other debts are
classified as
A. designated bonds
B. payable bonds
C. ordinate bonds
D. subordinated bonds
Answer: Option D
558. A market interest rate
for specific type of bond is
classified as bonds
A. required rate of return
B. required option
C. required rate of redemption
D. required rate of earning
Answer: Option A
559. Bond which is issued in
market and few days are
passed of its issuance is
classified as
A. instable bond
B. outstanding bond
C. standing bond
D. stable bond
Answer: Option B
560. Real risk-free rate is
applicable when it is expected
that there will be
A. high inflation
B. low inflation
C. no inflation
D. none of above
Answer: Option D
561. Bonds that do not pay
original coupon payment but
payment is made from
additional bonds are classified
as
A. payment in-kind bonds
B. payment off-kind bonds
C. kind payment
D. additional bond
Answer: Option A
562. According to top rating
agencies S&P double-B and
other lower grade bonds are
classified as
A. development bonds
B. junk bonds
C. compounded bonds
D. discounted bonds
Answer: Option B
563. Bond call provision that
is not practiced even after
several years of issuance is
classified as
A. original provision
B. deferred call
C. deferred provision
D. permanent provision
Answer: Option B
564. Price of an outstanding
bond increases when market
rate
A. never changes
B. increases
C. decreases
D. earned
Answer: Option C
565. An average inflation rate
which is expected over life of
security is classified as
A. inflation premium
B. off season premium
C. nominal premium
D. required premium
Answer: Option A
566. Type of bond which pays
interest payment only when it
earns is classified as
A. income bond
43
B. interest bond
C. payment bond
D. earning bond
Answer: Option A
567. Type of bonds that pays
no coupon payment but
provides little appreciation are
classified as
A. depreciated bond
B. interest bond
C. zero coupon bond
D. appreciation bond
Answer: Option C
568. In call provision, it is
stated that company will pay
to issue an amount
A. higher than par value
B. lower than par value
C. equal to par value
D. zero to par value
Answer: Option A
569. If coupon rate is less
than going rate of interest then
bond will be sold
A. seasoned par value
B. more than its par value
C. seasoned par value
D. at par value
Answer: Option B
570. Type of provision which
allows an orderly retirement
of an issued bond which is
classified as
A. whole call provision
B. super fund provision
C. floating fund provision
D. sinking fund provision
Answer: Option D

571. Bonds issued by small
companies tend to have
A. high liquidity premium
B. high inflation premium
C. high default premium
D. high yield premium
Answer: Option A
572. An interest yield = 7.9%
and capital gains yield = 2.5%
then total rate of return is
A. 10.00%
B. 3.16%
C. 0.31%
D. 5.40%
Answer: Option A
573. Stated value of bonds or
face value is considered as
A. state value
B. par value
C. bond value
D. per value
Answer: Option B
574. Type of bond in which
payments are made on basis of
inflation index is classified as
A. borrowed bond
B. purchasing power bond
C. surplus bond
D. deficit bond
Answer: Option B
575. A bond whose price will
rise above its face value is
classified as
A. premium face value
B. premium bond
C. premium stock
D. premium warrants
Answer: Option B
C. standing bonds
D. premium bonds
Answer: Option B
576. Coupon rate of bond is
also called
A. nominal rate
B. premium rate 581. Bonds issued by
C. quoted rate government and backed by
D. both a and c U.S government are classified
Answer: Option D as
A. issued security
B. treasury bonds
C. U.S bonds
D. return security
577. Bond's promised rate of Answer: Option B
return is also considered as
A. yield to earning
B. yield to investors
C. yield to maturity
D. yield to return 582. Legal document in
Answer: Option C which rights of issuing
corporation and bondholder's
state is classified as
A. legal rights classification
B. indenture
578. A premium which C. ownership statement
reflects possibility of issuer D. guarantee statement
who does not pay principal Answer: Option B
amount of bonds is called
A. seasoned risk premium
B. nominal risk premium
C. default risk premium
D. quoted risk premium 583. Price of an outstanding
Answer: Option C bond decreases when market
rate is
A. increased
B. decreased
C. earned
579. Real risk-free interest D. never changed
rate in addition with an Answer: Option A
inflation premium is equal to
A. required interest rate
B. quoted risk-free interest rate
C. liquidity risk-free interest rate
D. premium risk-free interest 584. Rate of interest which is
rate usually discussed by investors
Answer: Option B whenever rate of return is
discussed is classified as
A. yield to maturity
B. yield to return
C. yield to earning
580. An increasing in interest D. yield to investors
rate leads to decline in value of Answer: Option A
A. junk bonds
B. outstanding bonds
44

585. Tax free bonds issue for
welfare by industrial agencies
or pollution control agencies
are classified as
A. agent bonds
B. development bonds
C. pollution control bonds
D. Both B and C
Answer: Option D
586. Value generally
promises to pay at maturity
date and a firm borrows is
considered as bonds
A. bond value
B. per value
C. state value
D. par value
Answer: Option D
587. Maturity date decides at
time of issuance of bond and
legally permissible is classified
as
A. original maturity
B. permanent maturity
C. artificial maturity
D. valued maturity
Answer: Option A
588. Bonds with deferred call
have protection which is
classified as
A. provision protection
B. provision protection
C. deferred protection
D. call protection
Answer: Option D
589. Bonds issued by local
and state governments with
default risk are
A. municipal bonds
B. corporation bonds
C. default bonds
D. zero bonds
Answer: Option A
590. Indexed bonds that are
issued by linking payments to
inflation are classified as
A. treasury inflation protected
securities
B. premium protected securities
C. risk protected securities
D. liquidity protected securities
Answer: Option A
591. Bonds having zero
default risk are classified as
A. U.S bonds
B. return security
C. issued security
D. treasury bonds
Answer: Option D
592. Right held with
corporations to call issued
bonds for redemption is
considered as
A. artificial provision
B. call provision
C. redeem provision
D. original provision
Answer: Option B
593. Bond that has been
issued in very recent timing is
classified as
A. mature issue
B. earning issue
C. new issue
D. recent issue
Answer: Option C
45
594. Type of options that
permit bond holder to buy
stocks at stated price are
classified as
A. provision
B. guarantee
C. warrants
D. convertibles
Answer: Option C
595. When price of bond is
calculated below its par value,
it is classified as
A. classified bond
B. discount bond
C. compound bond
D. consideration earning
Answer: Option B
596. Required rate of return
in calculating bond's cash flow
is also classified as
A. going rate of return
B. yield
C. earning rate
D. Both A and B
Answer: Option D
597. An interest rate which is
used in calculation of cash
flows of bonds is called
A. required rate of redemption
B. required rate of earning
C. required rate of return
D. required option
Answer: Option C
598. According to top rating
agencies S&P triple-A and
double-A rating bonds are
classified as an
A. extremely discounted
B. extremely safe
C. extremely risky
D. extremely inflated
Answer: Option B
599. Rate on debt that
increases as soon market rises
is classified as
A. rising bet rate
B. floating rate debt
C. market rate debt
D. stable debt rate
Answer: Option B
600. If market interest rate
rises above coupon rate then
bond will be sold
A. equal to return rate
B. seasoned price
C. below its par value
D. above its par value
Answer: Option C
601. Bonds that can be
converted into shares of
common stock are classified as
A. convertible bonds
B. stock bonds
C. shared bonds
D. common bonds
Answer: Option A
602. Specific day at which
bond value is repaid can be
considered as
A. valued date
B. repayment date
C. payment date
D. maturity date
Answer: Option D
603. Type of bonds that are
issued by foreign governments
or foreign corporations are
classified as
A. zero risk bonds
B. zero bonds
C. foreign bonds
D. government bonds
Answer: Option C
604. A usage of proceeds of
new issue to retire issue with
high-rate is classified as
A. refunding operation
B. funding operation
C. proceeds operation
D. deferred operation
Answer: Option A
605. If default probability is
zero and bond is not called
then yield to maturity is
A. mature expected return rate
B. lower than expected return
rate
C. higher than expected return
rate
D. equal to expected return rate
Answer: Option D
606. Rate of return (in
percentages) is consists of
A. capital gain yield interest
yield
B. return yield + stable yield
C. return yield + instable yield
D. par value + market value
Answer: Option A
607. Reinvestment risk of
bonds is usually higher on
A. income bonds
B. callable bonds
C. premium bonds
46
D. default free bonds
Answer: Option B
608. If market interest rate
fall below coupon rate then
bond will be sold
A. below its par value
B. above its par value
C. equal to return rate
D. seasoned price
Answer: Option B
609. Yield of interest rate
which is below than coupon
rate, this yield is classified as
A. yield to maturity
B. yield to call
C. yield to earning
D. yield to investors
Answer: Option B
610. An inflation rate
including in quoted interest
rate on security, is inflation
rate
A. expected over security life
B. expected at deferred call
C. at bond issuance
D. expected at time of maturity
Answer: Option A
611. Market in which bonds
are traded over-the-counter
than in an organized exchange
is classified as
A. organized markets
B. trade markets
C. counter markets
D. bond markets
Answer: Option D
612. Coupon payment is
calculated with help of interest
rate, then this rate considers
as
A. payment interest
B. par interest
C. coupon interest
D. yearly interest rate
Answer: Option C
613. Coupon payment of
bond which is fixed at time of
issuance
A. remains same
B. becomes stable
C. becomes change
D. becomes low
Answer: Option A
614. An effect of interest rate
risk and investment risk on a
bond's yield is classified as
A. reinvestment premium
B. investment risk premium
C. maturity risk premium
D. defaulter's premium
Answer: Option C
615. According to Black
Schools model, stocks with call
option pays the
A. dividends
B. no dividends
C. current price
D. past price
Answer: Option B
616. An exercise of option in
future and part of option call
value depends specifically on
A. PV of exercising cost
B. FV of exercising cost
C. PV of cost volatility
D. FV of cost volatility
Answer: Option A
617. Yield on Treasury bill
with a maturity is classified as
a risk free rate but must be
equal to an
A. option closing price
B. option beginning price
C. option expiration
D. option model
Answer: Option C
618. Long-term equity
anticipation security is usually
classified as
A. short-term options
B. long-term options
C. short money options
D. yearly call
Answer: Option B
619. Types of option markets
do not include
A. European option
B. American option
C. expiry option
D. covered options
Answer: Option C
620. In binomial approach of
option pricing model, value of
stock is subtracted from call
option obligation value to
calculate
A. current value of portfolio
B. future value of portfolio
C. put option value
D. call option value
Answer: Option A
47
621. According to exercise
value and option price, market
value of option will be zero
when
A. stock price is maximum
B. option price is zero
C. stock price is zero
D. stock price is minimum
Answer: Option C
622. An excess of actual price
of option over an exercise
value of option is classified as
A. time value options
B. actual options
C. estimated options
D. optional pricing
Answer: Option A
623. At last day when
European and American
option can be exercised is
classified as
A. European date
B. American date
C. expiration date
D. money date
Answer: Option C
624. Current value of stock in
portfolio with current option
price Rs 20 is Rs 50, then
present value of portfolio
would be
A. Rs 30.00
B. Rs 70.00
C. Rs 40.00
D. Rs 80.00
Answer: Option A
625. Situation in financial
options in which strike price is
less than current price of stock
is classified as
A. in-the-money
B. out-of-the-money
C. out-of-the-portfolio
D. in-the-portfolio
Answer: Option A
626. Input call parity
relationship, present value of
exercise price is added to call
option which is equal to
A. put option stock
B. call option + stock
C. call option + market price
D. put option + market price
Answer: Option A
627. An option that gives
investors right to sell a stock
at predefined price is classified
as
A. put option
B. call option
C. money back options
D. out of money options
Answer: Option A
628. Value of stock is Rs 250
and call option obligation is Rs
100 then current value of
portfolio would be
A. Rs 125.00
B. Rs 150.00
C. Rs 350.00
D. Rs 2.50
Answer: Option B
629. In binomial approach of
option pricing model, fourth
step is to create
A. equalize domain of payoff
B. equalize ending price
C. riskless investment
D. high risky investment
Answer: Option C
630. Current value of
portfolio is Rs 550 and to
cover an obligation of call
option is Rs 200 then value of
stock would be
A. Rs 350.00
B. Rs 275.00
C. Rs 750.00
D. Rs 1,000.00
Answer: Option C
631. According to Black
Scholes model, purchaser can
borrow fraction of security at
risk free interest rate which is
A. short term
B. long term
C. transaction cost
D. no transaction cost
Answer: Option A
632. Type of option which
cannot be exercised before an
expiry date which is classified
as
A. European option
B. American option
C. Australian option
D. money option
Answer: Option A
633. Input call parity
relationship, put option minus
call option in addition with
stock is equal to
A. exercise price present value
B. exercise price future value
C. time line value
D. time value of bond
Answer: Option A
48
634. Current option is Rs 800
and current value of stock in
portfolio is Rs 1900 then
present value of portfolio
would be
A. -Rs 1,100.00
B. Rs 2,700.00
C. Rs 1,100.00
D. -Rs 2,700.00
Answer: Option C
635. Second step in binomial
approach of option pricing is
to define range of values
A. at expiration
B. at buying date
C. at exchange closing time
D. at exchange opening time
Answer: Option A
636. An increase in value of
option leads to low present
value of exercise cost only if it
has
A. low volatility
B. interest rates are high
C. interest rates are low
D. high volatility
Answer: Option B
637. Third step in binomial
approach of option pricing is
to
A. equalize beginning price
B. equalize range of payoffs
C. equalize domain of payoff
D. equalize ending price
Answer: Option B
638. A type of contract in
which contract holder has
right to sell an asset at specific
period for predetermining
price is classified as
A. option
B. written contract
C. determined contract
D. featured contract
Answer: Option A
639. According to Black
Scholes model, short term
seller receives today price
which
A. short term cash proceeds
B. proceeds in cheques
C. full cash proceeds
D. zero proceeds
Answer: Option C
640. An investor who writes
stock call options in his own
portfolio is classified as
A. due option
B. covered option
C. undue option
D. uncovered option
Answer: Option B
641. According to put call
parity relationship, a call
option minus put option in
addition with present value of
exercise is equal to
A. binomial property
B. constant property
C. constant and variable
property
D. stock
Answer: Option D
642. Current value of stock
included in portfolio is
subtracted from current
option price to calculate
A. future value of stock
B. present value of portfolio
C. future value of portfolio
D. present value of stock
Answer: Option B
643. In financial planning,
most high option price will
lead to
A. longer option period
B. smaller option period
C. lesser price
D. higher price
Answer: Option A
644. Current option is Rs 700
and current value of stock in
portfolio is Rs 1400 then
present value of portfolio will
be
A. -Rs 700.00
B. Rs 2,100.00
C. Rs 700.00
D. Rs 2,000.00
Answer: Option C
645. Present value of
portfolio is Rs 500 and current
option price is Rs 1200 then
value of stock included in
portfolio will be
A. Rs 1,700.00
B. -Rs 1,700.00
C. Rs 700.00
D. -Rs 700.00
Answer: Option A
49
646. Present value of
portfolio is Rs 1300 and
current value of stock in
portfolio is Rs 2300 then
current option price will be
A. Rs 3,600.00
B. Rs 1,000.00
C. Rs 1,250.00
D. Rs 1,500.00
Answer: Option B
647. An investor who buys
shares and writes a call option
on stock is classified as
A. put investor
B. call investor
C. hedger
D. volatile hedge
Answer: Option C
648. Value of stock is Rs 1000
and current value of portfolio
is Rs 1500 then obligation to
cover call option will be
A. Rs 6,667.00
B. Rs 2,500.00
C. Rs 2,000.00
D. Rs 500.00
Answer: Option D
649. In an option pricing, a
rises in risk free rate results in
option's value
A. slight time decreases
B. slight increases
C. slight decreases
D. slight time increases
Answer: Option B
650. If current price
increases from lower to higher
then an
A. option value equal to one
B. option value will increase
C. option value will decrease
D. option value equal to zero
Answer: Option B
651. In financial planning,
formula MAX [current price
of stock-strike price, 0] is used
to calculate
A. option return rate
B. exercise value
C. option value
D. stock value
Answer: Option B
652. According to put call
parity relationship, call option
plus present value of exercise
price minus stock is to
calculate
A. present value of option
B. call option
C. put option
D. future value of option
Answer: Option C
653. When two portfolios
have identical values and
payoffs then it is classified as
A. binomial parity relationship
B. put parity relationship
C. put option parity relationship
D. put call parity relationship
Answer: Option D
654. Greater value of option,
larger span of time value is
usually results in
A. shorter call option
B. longer call option
C. longer put option
D. shorter put option
Answer: Option B
655. Price at which European
and American options can be
exercised is classified as
A. exercise price
B. strike price
C. horizon price
D. Both A and B
Answer: Option D
656. Current option price is
added to present value of
portfolio for calculating
A. future value of portfolio
B. current value of stock
C. future value of stock
D. present value of portfolio
Answer: Option B
657. In options pricing, an
exercise price rises from lower
to higher which leads to
A. volatile options
B. option value increases
C. option value decreases
D. option value stable
Answer: Option C
658. In stock option, a little
chance exists for large gain on
stock when price of stock
A. have volatile movement
B. moves freely
C. rarely moves
D. stays same
Answer: Option C
659. According to Black
Scholes model, rate which is
constant and known is
classified as
A. short term return rate
B. long term return rate
50
C. risk free interest rate
D. risky rate of return
Answer: Option C
660. According to Black
Scholes model, trading of
securities and stock prices
moves respectively
A. constant and randomly
B. randomly and constant
C. randomly and continuously
D. continuously and randomly
Answer: Option D
661. In binomial approach of
option pricing model, last step
for finding an option is
A. price hike
B. price value
C. put price
D. call price
Answer: Option D
662. Type of options that do
not have stock in portfolio to
back up options is classified as
A. undue options
B. due options
C. naked options
D. total options
Answer: Option C
663. Market value of option
which is out-of-money is
A. greater than zero
B. equal to zero
C. lesser than zero
D. equal to one
Answer: Option A
664. Present value of
portfolio is Rs 900 and current
value of stock in portfolio is Rs
1500 then current option price
would be
A. Rs 2,400.00
B. -Rs 600.00
C. -Rs 2,400.00
D. Rs 600.00
Answer: Option D
665. Stock option is
considered more valuable in
situation when stock have
A. price hike in market
B. market stability
C. not volatile
D. highly volatile
Answer: Option D
666. Pricing model approach
in which it is assumed that
stock price can have one of
two values of stock is classified
as
A. valued approach
B. marketability approach
C. stock approach
D. binomial approach
Answer: Option D
667. An option which can be
exercised any desired time
before an expiry date is
classified as
A. Australian option
B. money option
C. European option
D. American option
Answer: Option D
668. In financial planning, a
higher strike price leads to call
option
A. price is higher
B. rate is lower
C. price is lower
D. rate is higher
Answer: Option C
669. According to Black
Scholes model, selling and
buying of stock have
A. discount rate
B. transaction costs
C. no transaction costs
D. no discounts
Answer: Option B
670. Stock option is more
worthwhile if it is
A. extremely volatile
B. less volatile
C. stable stock
D. unstable price stock
Answer: Option A
671. According to Black
Scholes model, call option is
well exercised on its
A. mid buying date
B. expiry date
C. buying date
D. mid selling date
Answer: Option B
672. Sellers of options in
financial markets are
classified as
A. expiry writer
B. option writer
C. contract writer
D. bond writer
Answer: Option B
51
673. In option pricing, an
increasing in option price due
to
A. time of expiry increases
B. time of expiry decreases
C. exchange time increases
D. exchange time decreases
Answer: Option A
674. Type of options in which
buyer of options has call on
200 shares in stock is classified
as
A. call option
B. stated option
C. unstated option
D. contractual option
Answer: Option A
675. Movement of price or
rise or fall of prices of options
is classified as
A. option lattice
B. pricing movement
C. price change
D. binomial lattice
Answer: Option D
676. Variability of stock
price, option term to maturity
and risk free rate are
dependents of
A. price of an option
B. expiry of an option
C. exercise of an option
D. estimation of an option
Answer: Option A
677. Value of option which is
considered as its worth as soon
as it is expired is classified as
A. minimum option value
B. minimum value
C. maximum value
D. exercise value
Answer: Option D
678. Current value of stock
including in portfolio is
subtracted from present value
of portfolio to calculate
A. last month option price
B. last year option price
C. current option price
D. future option price
Answer: Option C
679. Call options situation in
which strike price is greater
than current price of stock is
classified as
A. out-of-the-portfolio
B. in-the-portfolio
C. in-the-money
D. out-of-the-money
Answer: Option D
680. If stock market price is
higher than strike price so call
option
A. price will be lower
B. rate will be higher
C. price will be higher
D. rate will be lower
Answer: Option C
681. First step in binomial
approach of option pricing is
to
A. define ending price of stock
B. define beginning price of
stock
C. define range of values
D. define domain of values
Answer: Option A
682. Present value of
portfolio Rs 850 and current
option price Rs 1620 then
value of stock included in
portfolio would be
A. Rs 190.00
B. Rs 880.00
C. Rs 770.00
D. Rs 2,470.00
Answer: Option C
683. Beta reflects stock risk
for investors which is usually
A. individual
B. collective
C. weighted
D. linear
Answer: Option A
684. For any or lower degree
of risk, highest or any
expected return are concepts
use in
A. risky portfolios
B. behavior portfolios
C. inefficient portfolios
D. efficient portfolios
Answer: Option D
685. An unsystematic risk
which can be eliminated but
market risk is the
A. aggregate risk
B. remaining risk
C. effective risk
D. ineffective risk
Answer: Option B
686. An indication in a way
that variance of y-variable is
explained by x-variable which
is shown as
A. degree of dispersion is one
52
B. degree of dispersion is two
C. degree of dispersion is three
D. degree of dispersion is four
Answer: Option A
687. In regression of capital
asset pricing model, an
intercept of excess returns is
classified as
A. Sharpe's reward to variability
ratio
B. tenor's reward to volatility
ratio
C. Jensen's alpha
D. tenor's variance to volatility
ratio
Answer: Option C
688. In arbitrage pricing
theory, required returns are
functioned of two factors
which have
A. dividend policy
B. market risk
C. historical policy
D. Both A and B
Answer: Option D
689. If book value is greater
than market value comparison
with investors for future stock
are considered as
A. pessimistic
B. optimistic
C. experienced
D. inexperienced
Answer: Option A
690. An average return of
portfolio divided by its
coefficient of beta is classified
as
A. Sharpe's reward to variability
ratio
B. treynor's reward to volatility
ratio
C. Jensen's alpha
D. treynor's variance to
volatility ratio
Answer: Option B
691. Slope coefficient of beta
is classified statistically
significant if its probability is
A. greater than 5%
B. equal to 5%
C. less than 5%
D. less than 2%
Answer: Option C
692. Second factor in Fama
French three factor model is
the
A. size of industry
B. size of market
C. size of company
D. size of portfolio
Answer: Option C
693. Difference between
actual return on stock and
predicted return is considered
as
A. probability error
B. actual error
C. prediction error
D. random error
Answer: Option D
694. Complex statistical and
mathematical theory is an
approach, which is classified
as
A. arbitrage pricing theory
B. arbitrage risk theory
C. arbitrage dividend theory
D. arbitrage market theory
Answer: Option A
695. First step in determining
an efficient portfolio is to
consider
A. set of attainable portfolios
B. set of unattainable portfolios
C. set of attributable portfolios
D. set of attributable portfolios
Answer: Option A
696. Tendency of people to
blame failure on bad luck but
given tribute of success to
themselves is classified as
A. self-attribution bias
B. self-success bias
C. self-failure bias
D. self-condition bias
Answer: Option A
697. Stock portfolio with
highest book to market ratios
is considered as
A. H portfolio
B. L portfolio
C. S portfolio
D. B to M portfolio
Answer: Option A
698. High portfolio return is
6.5% and low portfolio return
is 3.0% then HML portfolio
will be
A. 2.16%
B. 9.50%
C. 3.50%
D. 0.4615 times
Answer: Option C
53
699. Stocks which has lower
book for market ratio are
considered as
A. optimistic
B. more risky
C. less risky
D. pessimistic
Answer: Option C
700. An individual stock
required return is equal to
risk free rate plus bearing risk
premium is an explanation of
A. security market line
B. capital market line
C. aggregate market line
D. beta market line
Answer: Option A
701. Future beta is needed to
calculate in most situations is
classified as
A. historical betas
B. adjusted betas
C. standard betas
D. varied betas
Answer: Option A
702. An efficient set of
portfolios represented through
graph is classified as an
A. attained frontier
B. efficient frontier
C. inefficient frontier
D. unattained frontier
Answer: Option B
703. Rational traders
immediately buy stock when
price is
A. too low
B. too high
C. conditional
D. inefficient portfolio
Answer: Option A
704. All points lie on line if
degree of dispersion is
A. four
B. one
C. Two
D. five
Answer: Option B
705. A high portfolio return
is subtracted from low
portfolio return to calculate
A. HML portfolio
B. R portfolio
C. subtracted portfolio
D. ML portfolio
Answer: Option A
706. Second step in
determining efficient
portfolios is to consider
efficient subset from set of
A. attainable portfolios
B. unattainable portfolios
C. attributable portfolios
D. non-attributable portfolio
Answer: Option A
707. If market value is
greater than book value then
investors for future stock are
considered as
A. experienced
B. inexperienced
C. pessimistic
D. optimistic
Answer: Option D
708. According to capital
asset pricing model
assumptions, investors will
borrow unlimited amount of
capital at any given
A. identical and fixed returns
B. risk free rate of interest
C. fixed rate of interest
D. risk free expected return
Answer: Option B
709. In calculation of betas,
an adjusted betas are highly
dependent on historical
A. unadjusted betas
B. adjusted historical betas
C. fundamental historical betas
D. fundamental varied betas
Answer: Option A
710. A curve which shows
attitude towards risk just way
reflected in return trade-off
function is classified as
A. difference curve
B. indifference curve
C. efficiency curve
D. affectivity curve
Answer: Option B
711. In capital market line,
risk of efficient portfolio is
measured by its
A. standard deviation
B. variance
C. aggregate risk
D. ineffective risk
Answer: Option A
712. Formula written as
0.67(Historical Beta) +
0.35(1.0) is used to calculate
A. historical betas
B. adjusted betas
54
C. standard betas
D. varied betas
Answer: Option B
713. A model which regresses
return of stock against return
of market is classified as
A. regression model
B. market model
C. error model
D. risk free model
Answer: Option B
714. According to capital
asset pricing model
assumptions, quantities of all
assets are
A. given and fixed
B. not given and fixed
C. not given and variable
D. given and variable
Answer: Option A
715. According to Fama
French Three-Factor model,
market value of company
equity is used to calculate
A. size of portfolio
B. size of industry
C. size of market
D. size of company
Answer: Option D
716. Negative minimum risk
portfolio of any security shows
that market security sold
A. less than original price
B. greater than original price
C. equal to original price
D. equal to sum of stocks
Answer: Option A

717. In capital asset pricing
model, covariance between
stock and market is divided by
variance of market returns is
used to calculate
A. sales turnover of company
B. risk rate of company
C. beta coefficient of company
D. weighted mean of company
Answer: Option C
718. Stocks which has high
book for market ratio are
considered as
A. more risky
B. less risky
C. pessimistic
D. optimistic
Answer: Option A
719. Stock portfolio with
lowest book for market ratios
is considered as
A. S portfolio
B. B to M portfolio
C. H portfolio
D. L portfolio
Answer: Option D
720. A measure which is not
included in Fama French
Three-Factor model is
A. realized risk free rate
B. rate of return on market
C. random error
D. risk premium
Answer: Option D
721. An average return of
portfolio divided by its
standard deviation is classified
as
A. Jensen's alpha
B. Treynor's variance to
volatility ratio
C. Sharpe's reward to variability
ratio
D. Treynor's reward to volatility
ratio
Answer: Option C
722. According to capital
asset pricing model
assumptions, variances,
expected returns and
covariance of all assets are
A. identical
B. not identical
C. fixed
D. variable
Answer: Option A
723. Sum of market risk and
diversifiable risk are classified
as total risk which is
equivalent to
A. Sharpe's alpha
B. standard alphas
C. alpha's variance
D. variance
Answer: Option D
724. Betas tend to move
towards 1.0 with passage of
time are classified as
A. standard betas
B. varied betas
C. historical betas
D. adjusted betas
Answer: Option D
725. Stock issued by company
have higher rate of return
because of
A. low market to book ratio
B. high book to market ratio
C. high market to book ratio
55
D. low book to market ratio
Answer: Option B
726. Betas that are constantly
adjusted to reflect changes in
capital structure and firms
operations are classified as
A. fundamental structure
B. fundamental adjustment
C. fundamental betas
D. fundamental operations
Answer: Option C
727. Type of relationship
exists between an expected
return and risk of portfolio is
classified as
A. non-linear
B. linear
C. fixed and aggregate
D. non-fixed and non-aggregate
Answer: Option B
728. Capital market line
reflects an attitude of investors
towards risk which is
considered as an/a
A. non-aggregate
B. effective
C. ineffective
D. aggregate
Answer: Option D
729. A theory which states
that assets are traded at price
equal to its intrinsic value is
classified as
A. efficient money hypothesis
B. efficient market hypothesis
C. inefficient market hypothesis
D. inefficient money hypothesis
Answer: Option B

730. In capital asset pricing
model, characteristic line is
classified as
A. regression line
B. probability line
C. scattered points
D. weighted line
Answer: Option A
731. All assets are perfectly
divisible and liquid in
A. tax free pricing model
B. cost free pricing model
C. capital asset pricing model
D. stock pricing model
Answer: Option C
732. Relationship between
risk free asset and a single
risky asset are always
A. linear
B. non-linear
C. efficient
D. effective
Answer: Option A
733. Gross domestic product,
world economy strength and
level of inflation are factors
which is used to determine
A. market realized return
B. portfolio realized return
C. portfolio arbitrage risk
D. arbitrage theory of return
Answer: Option A
734. Rational traders
immediately sell stock when
price is
A. conditional
B. inefficient portfolio
C. too low
D. too high
Answer: Option D
735. Stock issued by company
have lower rate of return
because of
A. high market to book ratio
B. low book to market ratio
C. low market to book ratio
D. high book to market ratio
Answer: Option B
736. Riskless rate in addition
with risk premium is
multiplied by standard
deviation of portfolio for using
to calculate expected return
rate on
A. efficient portfolio
B. inefficient portfolio
C. attributable portfolio
D. non-attributable portfolio
Answer: Option A
737. Realized and required
return for individual stocks
are classified as function of
fundamental
A. arbitrage factors
B. economic factors
C. portfolio factors
D. realized theory factors
Answer: Option B
738. First factor in Fama
French three factor model is
A. CAPM stock beta
B. economic stock beta
C. CAPM portfolio beta
D. CAPM realized beta
Answer: Option A
56
739. A line which shows
relationship between an
expected return and risk on
efficient portfolio is considered
as
A. efficient market line
B. attributable market line
C. capital market line
D. security market line
Answer: Option C
740. Relationship between
total risk of stock, diversifiable
risk and market risk is
classified as
A. total risk
B. standard deviation
C. standard alpha
D. treynor alpha
Answer: Option A
741. In arbitrage pricing
theory, higher required rate of
return is usually paid on stock
A. higher market risk
B. higher dividend
C. lower dividend
D. lower market risk
Answer: Option B
742. Formula written as
market risk premium divided
by standard deviations of
returns on market portfolio is
used to calculate
A. capital market line
B. security market line
C. fixed market line
D. variable market line
Answer: Option A
743. In capital asset pricing
model, investors assume that
buying and selling activity will
A. affect stock prices
B. not affect stock prices
C. have high taxes
D. high transaction cost
Answer: Option B
744. For investors, steeper
slope of indifference curve
shows more
A. risk averse investor
B. risk taker investor
C. in differential investor
D. ineffective investment
Answer: Option A
745. Positive minimum risk
portfolio of any security shows
that market security sold
A. equal to original price
B. equal to sum of stocks
C. less than original price
D. greater than original price
Answer: Option D
746. Third factor in Fama
French three factor model is
ratio which is classified as
A. book to market ratio
B. market to book ratio
C. company to industry ratio
D. stock to portfolio ratio
Answer: Option B
747. In capital asset pricing
model, assumptions must be
followed including
A. no taxes
B. no transaction costs
C. fixed quantities of assets
D. all of above
Answer: Option D
748. Two alternative
expected returns are
compared with help of
A. coefficient of variation
B. coefficient of deviation
C. coefficient of standard
D. coefficient of return
Answer: Option A
749. Dollar return is divided
by invested amount which is
used for calculating the
A. rate of return
B. return amount
C. investment rate
D. received amount
Answer: Option A
750. An analysis of decision
making of investors and
managers is classified as
A. risky finance
B. behavioral finance
C. premium finance
D. buying finance
Answer: Option B
751. Yield on bond is 7% and
market required return is
14% then market risk
premium would be
A. 2.00%
B. 21.00%
C. 0.50%
D. 7.00%
Answer: Option D
752. An expected rate of
return is denoted by
A. e-bar
57
B. r-bar
C. r-hat
D. e-hat
Answer: Option C
753. In expected future
returns, tighter probability
distribution shows risk on
given investment which is
A. smaller
B. greater
C. less risky
D. highly risky
Answer: Option A
754. An inflation free rate of
return and inflation premium
are two components of
A. quoted rate
B. unquoted rate
C. steeper rate
D. portfolio rate
Answer: Option A
755. Risk affects any firm
with factors such as war,
recessions, inflation and high
interest rates is classified as
A. diversifiable risk
B. market risk
C. stock risk
D. portfolio risk
Answer: Option B
756. Risk on a stock portfolio
which cannot be eliminated or
reduced by placing it in
diversified portfolio is
classified as
A. diversifiable risk
B. market risk
C. stock risk
D. portfolio risk
Answer: Option B

757. In investment returns, a
received amount is subtracted
from an invested amount
which is used to calculate
A. dollar received
B. dollar return
C. dollar invested
D. return percentage
Answer: Option B
758. Past realized rate of
return in period t is denoted
by
A. t bar r
B. t hat r
C. r hat t
D. r bar t
Answer: Option D
759. An amount invested is
Rs 1500 and an amount
received is Rs 2000 then
return would be
A. Rs 500.00
B. -Rs 500.00
C. Rs 3,500.00
D. -Rs 3,500.00
Answer: Option A
760. External factors such as
expiration of basic patents and
industry competition effect
A. patents premium
B. competition premium
C. company's beta
D. expiry premium
Answer: Option C
761. Type of risk in which
beta is equal to one is
classified as
A. multiple risk stock
B. varied risk stock
C. total risk stock
D. average risk stock
Answer: Option D
762. A portfolio consists of all
stocks in a market is classified
as
A. market portfolio
B. return portfolio
C. correlated portfolio
D. diversified portfolio
Answer: Option A
763. Beta coefficient is used
to measure market risk which
is an index of
A. coefficient risk volatility
B. market risk volatility
C. stock market volatility
D. portfolio market portfolio
Answer: Option C
764. Standard deviation of
tighter probability
distribution is
A. long-termed
B. short-termed
C. risky
D. smaller
Answer: Option D
765. An opposite of perfect
positive correlation + 1.0 is
called
A. negative correlation
B. multiple correlation
C. divisor correlation
D. none of above
Answer: Option A
58
766. A technique of lowering
risk for multinational
companies and globally
designed portfolios is classified
as
A. national diversification
B. behavioral diversification
C. global diversification
D. behavioral finance
Answer: Option C
767. Risk which is caused by
events such as strikes,
unsuccessful marketing
programs and other lawsuits is
classified as
A. stock risk
B. portfolio risk
C. diversifiable risk
D. market risk
Answer: Option C
768. Required return is 11%
and premium for risk is 8%
then risk free return will be
A. 3.00%
B. 19.00%
C. 0.72%
D. 1.38%
Answer: Option A
769. Range of probability
distribution with 99.74% lies
within
A. (+ 3σ and -3σ)
B. (+ 4σ and -4σ)
C. (+ 1σ and -1σ)
D. (+ 2σ and -2σ)
Answer: Option A
770. Risk per unit of return
or stand alone risk is
represented by
A. coefficient of standard
B. coefficient of return
C. coefficient of variation
D. coefficient of deviation
Answer: Option C
771. Risk on a stock portfolio
which can be reduced by
placing it in diversified
portfolio is classified as
A. stock risk
B. portfolio risk
C. diversifiable risk
D. market risk
Answer: Option C
772. An amount invested is
Rs 4000 and return is Rs 300
then rate of return will be
A. 4.30%
B. 3.70%
C. 7.50%
D. 0.08%
Answer: Option C
773. In capital asset pricing
model, stock with high
standard deviation tend to
have
A. low variation
B. low beta
C. high beta
D. high variation
Answer: Option B
774. In asset portfolio,
number of stocks are
increased to
A. reduce return
B. reduce average
C. reduce risk
D. increase prices 779. A risk which is classified
Answer: Option C as its contribution to risk of
portfolio is classified as
A. classified risk
B. contributed risk
C. irrelevant risk
775. Standard deviation is D. relevant risk
18% and expected return is Answer: Option D
15.5% then coefficient of
variation would be
A. 0.86%
B. 1.16%
C. 2.50% 780. Chance of happening
D. -2.50% any unfavourable event in
Answer: Option B near future is classified as
A. chance
B. event happening
C. probability
D. risk
776. Standard deviation is Answer: Option D
divided by expected rate of
return is used to calculate
A. coefficient of variation
B. coefficient of deviation
C. coefficient of standard 781. A tighter probability
D. coefficient of return distribution shows the
Answer: Option A A. higher risk
B. lower risk
C. expected risk
D. peaked risk
Answer: Option B
777. If stock has a great risk
related to it than a required
return is
A. higher
B. lower 782. Stock which has higher
C. zero correlation with market tend
D. all of above to have
Answer: Option A A. high beta, less risky
B. low beta, more risky
C. high beta, more risky
D. low beta, less risky
Answer: Option C
778. An amount invested is
Rs 2000 and return is Rs 200
then rate of return would be
A. 0.10%
B. 10.00% 783. According to probability
C. Rs 1,800.00 distribution of rates of return,
D. Rs 2,200.00 a close outcome to an expected
Answer: Option B value is shown by
A. value distribution
B. expected distribution
C. more peaked distribution
D. less peaked distribution
Answer: Option C
59

784. A range of probability
distribution with 95.46% lies
within
A. (+ 1σ and -1σ)
B. (+ 2σ and -2σ)
C. (+ 3σ and -3σ)
D. (+ 4σ and -4σ)
Answer: Option B
785. Coefficient of variation
is used to identify an effect of
A. risk
B. return
C. deviation
D. Both A and B
Answer: Option D
786. In portfolio, beta of
individual security in portfolio
represented as their weighted
average is classified as
A. average of portfolio
B. beta of portfolio
C. weighted portfolio
D. collective stocks
Answer: Option B
787. Coefficient of beta is
used to measure stock
volatility
A. coefficient of market
B. relative to market
C. irrelative to market
D. same with market
Answer: Option B
788. Probability distribution
is classified as normal if
expected return lies between
A. ( + 1 and -1)
B. ( + 2 and -2)
C. ( + 3 and -3)
D. ( + 4 and -4)
Answer: Option A
789. Greater chance of lower
actual return than expected
return and greater variation is
indicated by
A. smaller standard deviation
B. larger standard deviation
C. smaller variance
D. larger variance
Answer: Option B
790. Tendency of measuring
correlation of two variables is
classified as
A. tendency coefficient
B. variable coefficient
C. correlation coefficient
D. double coefficient
Answer: Option C
791. Size of firm and market
or book ratio are variables
which are related to
A. premium returns
B. unquoted returns
C. quoted returns
D. stock returns
Answer: Option D
792. A model in which
behavior of asset returns is
measured for set of risk
factors and market risk is
classified as
A. factorization model
B. Two factor model
C. multifactor model
D. quoted factor model
Answer: Option C
60
793. Relationship between
risk and required return is
classified as
A. security market line
B. required return line
C. market risk line
D. risky return line
Answer: Option A
794. Tendency of moving
together of two variables is
classified as
A. correlation
B. move tendency
C. variables tendency
D. double tendency
Answer: Option A
795. Of all stocks in a
portfolio, required rate of
return is classified as
A. return portfolio
B. in volatile portfolio
C. volatile portfolio
D. market portfolio
Answer: Option D
796. Risk in average
individual stock can be
reduced by placing an
individual stock in
A. low risk portfolio
B. diversified portfolio
C. undiversified portfolio
D. high risk portfolio
Answer: Option B
797. Required return is 15%
and premium for risk is 11%
then risk free return would be
A. 26.00%
B. 4.00%
C. 16.50%
D. 1.36%
Answer: Option B
798. Market required return
is subtracted from risk free
rate which is used to calculate
A. quoted risk premium
B. market risk premium
C. portfolio risk premium
D. unquoted risk premium
Answer: Option B
799. An estimation by
marginal investor, a higher
expected return is earned on
A. more risky securities
B. less risky securities
C. less premium
D. high premium
Answer: Option A
800. Term structure
premium, an inflation of bond
and bond default premium are
included in
A. risk factors
B. premium factors
C. bond buying factors
D. multi model
Answer: Option A
801. Mostly in financials, risk
of portfolio is smaller than
that of assets
A. mean
B. weighted average
C. mean correlation
D. negative correlation
Answer: Option B
802. If risk can be eliminated
with help of diversification,
then relevant risk is
A. smaller than stand-alone risk
B. larger than stand-alone risk
C. smaller than diverse risk
D. larger than diverse risk
Answer: Option A
803. Treasury yielded by
bond is 7% and market
required return is 13% then
market risk premium will be
A. 2.16%
B. 20.00%
C. 6.00%
D. 0.53%
Answer: Option C
804. Chance of occurrence of
any event is classified as
A. probability
B. risk
C. chance
D. event happening
Answer: Option A
805. According to market
risk premium, an amount of
risk premium depends upon
investor
A. risk taking
B. risk aversion
C. market aversion
D. portfolio aversion
Answer: Option B
806. When changes in patents
and industry competition
occur, required rate of return
A. changes
B. does not change
C. becomes zero
61
D. becomes one
Answer: Option B
807. In an individual stock,
relevant risk is classified as
A. alpha coefficient
B. beta coefficient
C. stand-alone coefficient
D. relevant coefficient
Answer: Option B
808. Type of premium asked
by investors for bearing risk
on average stock is classified
as
A. average premium
B. market risk premium
C. stock premium
D. buying discount
Answer: Option B
809. Portfolio which consists
of perfectly positive correlated
assets having no effect of
A. negativity
B. positivity
C. correlation
D. diversification
Answer: Option D
810. Weighted average of
probabilities is classified as
A. average rate of return
B. expected rate of return
C. past rate of return
D. weighted rate of return
Answer: Option B
811. Market risk and
diversifiable risk are two
components of
A. stock's risk
B. portfolio risk
C. expected return
D. stock return
Answer: Option A
812. Market risk premium is
8% and risk free return is 7%
then market required return
would be
A. 15.00%
B. 1.00%
C. 5.60%
D. 1.14%
Answer: Option A
813. Range of probability
distribution with 68.26% lies
within
A. (+ 3σ and -3σ)
B. (+ 4σ and -4σ)
C. (+ 1σ and -1σ)
D. (+ 2σ and -2σ)
Answer: Option C
814. In capital asset pricing
model, an amount of risk that
stock contributes to portfolio
of market is classified as
A. stand-alone coefficient
B. relevant coefficient
C. alpha coefficient
D. beta coefficient
Answer: Option D
815. Case in which average
investors risk aversion is
greater than slope of line and
risk premium respectively is
A. steeper, greater
B. steeper, smaller
C. steeper, zero
D. Both A and B
Answer: Option A
816. Expected returns
weighted average on assets in
portfolio is considered as
A. weighted portfolio
B. expected return on portfolio
C. coefficient of portfolio
D. expected assets
Answer: Option B
817. Correct measure of risk
of stock is called
A. alpha
B. beta
C. variance
D. market relevance
Answer: Option B
818. Standard deviation is
18% and coefficient of
variation is 1.5% an expected
rate of return will be
A. 27.00%
B. 12.00%
C. 19.50%
D. none of above
Answer: Option C
819. An amount invested is
Rs 2500 and an amount
received is Rs 1500 then
return will be
A. -Rs 4,000.00
B. Rs 4,000.00
C. -Rs 1,000.00
D. Rs 1,000.00
Answer: Option C
62
820. An additional desired
compensation by investors for
assuming an additional risk on
investment is classified as
A. risk premium
B. investor premium
C. additional premium
D. assumed premium
Answer: Option A
821. Method and model used
to analyze relationship
between rates of return and
risk is classified as
A. capital asset pricing model
B. portfolio asset pricing model
C. asset market pricing model
D. portfolio pricing model
Answer: Option A
822. Stocks in market
portfolio are graphically
represented with
A. dashed line
B. straight line
C. market line
D. risk line
Answer: Option A
823. Stock with large amount
of contribution of risk in a
diversified portfolio is
represented by
A. high beta and standard
deviation
B. high beta, low standard
deviation
C. low beta, low standard
deviation
D. low beta, low variance
Answer: Option A
824. Shares or stocks which
are protected against
withdrawals of funds by an
original stock owners are
classified as
A. protected shares
B. founders shares
C. withdrawal shares
D. original shares
Answer: Option B
825. Method of stock
valuation which is multiple of
earning per share, book value
and net income is classified as
A. stock multiple analysis
B. dividend multiple analysis
C. market multiple analysis
D. stock and multiple analysis
Answer: Option C
826. Preferred dividend is Rs
50 and required rate of return
is 2.5% then value of
preferred stock would be
A. Rs 20.00
B. Rs 125.00
C. Rs 2,000.00
D. Rs 52.50
Answer: Option C
827. In expected rate of
return for constant growth,
stock price must grow
according to an expected rate
and
A. at same price
B. at different price
C. at yielded price
D. at buying price
Answer: Option A
828. Dividend present value
for period of non-constant
growth in addition with
horizon value is used to
calculate
A. stock extrinsic value
B. stock intrinsic value
C. dividend intrinsic value
D. stock intrinsic value
Answer: Option B
829. Current price is Rs 40
and dividend paid is Rs 10
then dividend yield will be
A. Rs 25.00
B. 25.00%
C. Rs 4.00
D. 4.00%
Answer: Option B
830. Capital gains yield is
multiplied for beginning price
to calculate
A. capital gain
B. growth gain
C. regular yield
D. variable yield
Answer: Option A
831. Constant growth rate is
9.5% and an expected rate of
return is 13.5% then expected
dividend yield would be
A. 23.00%
B. 1.42%
C. 4.00%
D. 14.50%
Answer: Option C
832. Paid dividend is Rs 20
and current price is Rs 50 then
dividend yield will be
A. 40.00%
B. 20.00%
63
C. 30.00%
D. 50.00%
Answer: Option A
833. Stock in small
companies, owned by few
people but not actively traded
is classified as
A. closely held stock
B. largely held stock
C. attributed stock
D. successful stock
Answer: Option A
834. Type of stock which
have characteristics of bonds
and common stock is classified
as
A. bonds equity
B. common shares
C. common stock
D. preferred stock
Answer: Option D
835. Process in which
stockholders transfer right to
vote to any other person is
classified as
A. proxy
B. transfer process
C. voting process
D. assigning right process
Answer: Option A
836. Right of common
stockholders to purchase
additional stock issued by
company is classified as
A. common right
B. pre-emptive right
C. purchase right
D. selling right
Answer: Option B

837. Type of stock in which
dividends are tied to any
particular part of a firm is
classified as
A. dividend stock
B. firm part stock
C. tied stock
D. tracking stock
Answer: Option D
838. Rate of return which
considers riskiness and an
available returns on
investments is classified as
A. constant dividend
B. constant rate
C. maximum rate of return
D. minimum acceptable rate of
return
Answer: Option D
839. Stock market theory
which states that stocks are in
equilibrium and impossible for
investors to beat market is
classified as an
A. inefficient market hypothesis
B. efficient market hypothesis
C. efficient stock hypothesis
D. inefficient stock hypothesis
Answer: Option B
840. Growth in earnings per
share is primarily resultant of
growth in
A. dividends
B. asset value
C. fundamental value
D. yearly value
Answer: Option A
841. In expected rate of
return for constant growth,
capital gains is divided by
capital gains yield to calculate
A. returning price
B. ending price
C. beginning price
D. regular price
Answer: Option C
842. Stock which has fixed
payments and failure of
payments which do not lead to
bankruptcy is classified as
A. common stock
B. preferred stock
C. bonds equity
D. common shares
Answer: Option B
843. An efficient market
hypothesis states all public
information which is reflected
in current market prices is
classified as
A. weak form efficiency
B. strong form efficiency
C. market efficiency
D. semi strong efficiency
Answer: Option D
844. In expected rate of
return for constant growth, an
expected dividend yield must
be
A. functional decreasing
B. constant
C. continuously growing
D. functional increasing
Answer: Option B
64
845. Value of stock as
concluded with help of
analysis by particular investor
is classified as
A. particular value
B. intrinsic value
C. fundamental value
D. Both B and C
Answer: Option D
846. In expected rate of
return for constant growth, an
expected yield on capital must
be
A. equal to zero
B. greater than expected growth
rate
C. less than expected growth
rate
D. equal to expected growth rate
Answer: Option D
847. Capital gain is Rs 2 and
beginning price is Rs 24 then
capital gains yield will be
A. 22.00%
B. 24.00%
C. 14.00%
D. 12.00%
Answer: Option D
848. A formula such as an
original investment plus an
expected capital gain is used to
calculate
A. final stock
B. expected stock
C. expected final stock price
D. final stock price
Answer: Option C
849. Dividend expected on
stock during coming year is
classified as
A. current dividend yield
B. expected dividend yield
C. yearly dividend
D. past yield
Answer: Option B
850. In expected rate of
return for constant growth,
capital gains is divided by
beginning price to calculate
A. yield of loan return
B. yield of mortgage return
C. yield of capital gains
D. yield of fixed cost
Answer: Option C
851. Preferred dividend is
divided for required rate of
return to calculate
A. value of number of shares
B. value of equity
C. value of preferred stock
D. value of common stock
Answer: Option C
852. Value of stock is Rs 400
and required rate of return is
20% then preferred dividend
would be
A. Rs 80.00
B. Rs 8,000.00
C. Rs 20.00
D. Rs 50.00
Answer: Option A
853. An amount of company
retain earning, return on
equity and inflation are
factors which effect
A. earning growth
B. return on assets
C. return on sales
D. return on value
Answer: Option A
854. Value of stock is Rs 300
and preferred dividend is Rs
60 then required rate of return
would be
A. 18%
B. 20%
C. 22%
D. 24%
Answer: Option B
855. Tracking stock of
company is also classified as
A. target stock
B. dividend stock
C. firm part stock
D. tied stock
Answer: Option A
856. An expected dividend
yield is 5.5% and expected
rate of return is 11.5% then
constant growth rate would be
A. 2.09%
B. -6.00%
C. 17.50%
D. 6.00%
Answer: Option D
857. A right which controls
and prevents transfer from
current stockholders to other
new stockholders is considered
as
A. corporate charter
B. selling charter
C. laws
D. purchase chart
Answer: Option A
858. In market analysis,
market multiple is multiplied
by firm earning before
interest, taxes, depreciation
and amortization to calculate
A. market total value
B. firm total value
C. industry value
D. taxes value
Answer: Option B
859. Dividend will grow at
non-constant rate for N
periods and periods such as N
is classified as
A. growth date
B. terminal date
C. horizon date
D. Both B and C
Answer: Option D
860. Beginning price is Rs 25
and capital gains yield is 5%
then capital gain would be
A. Rs 50.00
B. Rs 1.25
C. 50 times
D. Rs 23.75
Answer: Option B
861. If an expected final stock
price is Rs 85 and an original
investment is Rs 70 then value
of expected capital gain would
be
A. Rs 15.00
B. -Rs 15.00
C. Rs 155.00
D. -Rs 155.00
Answer: Option A
862. Third step in calculating
value of stock with non-
constant growth rate is to find

65
A. PV of expected dividends
B. FV of expected dividends
C. PV of intrinsic rate
D. FV of intrinsic rate
Answer: Option A
863. In expected rate of
return for constant growth,
expected total rate of return is
equal to
A. buying pricing
B. dividend yield
C. rate of return
D. selling pricing
Answer: Option B
864. An efficient market
hypothesis states in which all
public or private information
is reflected in current market
prices is classified as
A. market efficiency
B. semi strong efficiency
C. weak form efficiency
D. strong form efficiency
Answer: Option D
865. An expected dividend
yield is added into expected
growth rate to calculate
A. dividend return
B. expected rate of return
C. expected capital
D. invested capita
Answer: Option B
866. Dividend yield is 25%
and current price is Rs 40 then
dividend yield will be
A. Rs 50.00
B. Rs 10.00
C. Rs 65.00
D. Rs 15.00
Answer: Option B
867. Paid dividend with
dividend yield 25% is Rs 5
then cost price would be
A. 30.00%
B. Rs 30.00
C. 20.00%
D. Rs 20.00
Answer: Option D
868. An expected final stock
price is Rs 45 and an original
investment is Rs 25 then an
expected capital gain will be
A. Rs 75.00
B. -Rs 75.00
C. -Rs 20.00
D. Rs 20.00
Answer: Option D
869. Value of stock is Rs 1200
and preferred dividend is Rs
120 then required rate of
return would be
A. Rs 144,000.00
B. 10.00%
C. Rs 10.00
D. 0.2 times
Answer: Option B
870. Expected dividends in
each year and price investor
expecting to get at selling of
stock are two components of
A. dividend cash flow
B. expected cash flows
C. price cash flows
D. investing cash
Answer: Option B
66
871. In expected rate of
return for constant growth, an
expected total rate of return
must be
A. less than expected yield on
dividend
B. greater than expected yield
on dividend
C. equal to expected yield on
dividend
D. equal to one
Answer: Option C
872. Owners of corporation
having certain rights and
privileges are considered as
A. special stockholders
B. common stockholders
C. public stocks
D. enactive stocks
Answer: Option B
873. Stockholders having
right to elect directors and in
smaller firms have high post
are classified as
A. public stocks
B. inactive stocks
C. special stockholders
D. common stockholders
Answer: Option D
874. Constant growth rate is
7.2% and an expected rate of
return is 12.5% then expected
dividend yield will be
A. 5.30%
B. 19.70%
C. -5.30%
D. 17.36%
Answer: Option A
875. An original investment is
Rs 30 and an expected capital
gain is Rs 10 then an expected
final stock price will be
A. Rs 20.00
B. Rs 40.00
C. -Rs 40.00
D. -Rs 20.00
Answer: Option B
876. Constant growth rate is
6.5% and an expected
dividend yield is 3.4% then an
expected rate of return would
be
A. 9.90%
B. 10.00%
C. 3.10%
D. 19.12%
Answer: Option A
877. According to investors
point of view, an expected rate
of return is rate on stocks
which they
A. receive in future
B. received in past
C. yearly growth
D. semi-annual growth
Answer: Option A
878. Second step in
calculating value of stock with
non-constant growth rate is to
find out an
A. expected intrinsic stock
B. extrinsic stock
C. expected price of stock
D. intrinsic stock
Answer: Option C
879. Paid dividend is Rs 20
and dividend yield is 40% then
current price would be
A. 60.00%
B. Rs 60.00
C. Rs 50.00
D. 2.00%
Answer: Option C
880. Preferred stock
dividends must be paid on
common stock and must have
A. fixed amount of dividends
B. fixed amount of shares
C. variable amount of dividends
D. variable amount of shares
Answer: Option A
881. Constant growth model
would not be used in condition
if growth rate is
A. greater than dividend paid
B. equal to realized rate of
return
C. less than realized rate of
return
D. greater than realized rate of
return
Answer: Option D
882. Present value of
dividends which is expected to
be provided in future is
classified as an
A. intrinsic value of stock
B. extrinsic value of stock
C. intrinsic bonds
D. extrinsic bonds
Answer: Option A
883. Cash flow which is
available for all investors of
company is classified as
A. extrinsic stock
B. intrinsic stock
C. investing cash
D. free cash flow
67
Answer: Option D
884. Stock in large companies
and own by people who are
not active in management is
classified as
A. self-held stock
B. privately held stock
C. publicly held stock
D. enactive held stock
Answer: Option C
885. Information which is
reflected in current market
prices with help of past price
movements is classified as
A. market efficiency
B. semi strong efficiency
C. weak form efficiency
D. strong form efficiency
Answer: Option C
886. Capital gain is Rs 3 and
capital gains yield is 6% then
beginning price will be
A. Rs 18.00
B. Rs 36.00
C. Rs 50.00
D. Rs 55.00
Answer: Option C
887. Growth rate which is
predicted by marginal
investors for dividends is
classified as
A. expected growth rate
B. annual growth rate
C. past growth rate
D. unexpected growth rate
Answer: Option A
888. An expected final stock
price is Rs 70 and an expected
capital gain is Rs 25 then an
original investment would be
A. Rs 45.00
B. -Rs 45.00
C. Rs 95.00
D. -Rs 95.00
Answer: Option A
889. Value of future
dividends after horizon date is
classified as
A. hypothesis value
B. horizon value
C. terminal value
D. Both B and C
Answer: Option D
890. Pre-emptive right of
common stockholders are
necessarily included in
company
A. laws
B. purchase chart
C. corporate charter
D. selling charter
Answer: Option C
891. Constant growth rate is
8% and an expected dividend
yield is 5.4% then expected
rate of return would be
A. -3.40%
B. 3.40%
C. 13.40%
D. -13.40%
Answer: Option C
892. Real rate of return, risk
and expected inflation are
primary determinants of
A. minimum rate of return
B. accepted return
C. expected return
D. real risk free rate
Answer: Option A
893. Preferred stocks are also
classified as
A. intrinsic preference Answer: Option D
B. perpetuities
C. extrinsic preference
D. weak preference
Answer: Option B
898. An earning before
interest, taxes, depreciation
and amortization average
multiple for publicly traded
894. After-the-fact rate of companies is classified as
return often consider as A. entity multiple
realized or actual can be B. depreciation multiple
denoted C. earning multiple
A. s hat r D. amortization multiple
B. r bar s Answer: Option A
C. r hat s
D. s bar r
Answer: Option B
899. An expected rate of
return is subtracted from
capital gains yield to calculate
895. In expected rate of A. expected dividend yield
return for constant growth, B. capital earning
dividends are expected to C. casual growth
grow but with the D. specialized growth rate
A. constant rate Answer: Option A
B. variable rate
C. yielding rate
D. returning yield
Answer: Option A
900. An expected dividend
yield is subtracted from an
expected rate of return which
is used to calculate
896. Expected capital gain is A. specialized growth rate
Rs 20 and expected final price B. capital gains yield
is Rs 50 then original C. casual growth yield
investment will be D. past growth rate
A. Rs 30.00 Answer: Option B
B. -Rs 30.00
C. Rs 70.00
D. -Rs 70.00
Answer: Option A
901. First step in calculating
value of stock with non-
constant growth rate is to
A. estimate expected dividend
897. Preferred dividend is Rs B. actual expected dividend
60 and required rate of return C. estimate number of share
is 20% then value of preferred D. estimate intrinsic shares
stock will be Answer: Option A
A. Rs 40.00
B. Rs 120.00 902. Calculation of formula
C. Rs 12.00 in common stock valuation
D. Rs 300.00 does not include
68
A. intrinsic value
B. dividend of stockholder
C. number of stock issued
D. expected growth rate
Answer: Option C
903. An expected dividend
yield is 7.5% and an expected
rate of return is 15.5% then
constant growth rate will be
A. 22.00%
B. 8.00%
C. 23.00%
D. 2.06%
Answer: Option B
904. Average rate of return
which is required by all
investors of company is
classified as
A. extrinsic cost of capital
B. weighted average cost of
capital
C. mean cost of capital
D. standard cost of cash
Answer: Option B
905. An actual rate of return
is subtracted from expected
growth rate then it is divided
from dividend stockholders
expects use for calculating
A. dividend growth model
B. actual growth model
C. constant growth model
D. variable growth model
Answer: Option C
906. Value of stock is Rs 900
and required rate of return is
30% then preferred dividend
will be
A. Rs 270.00
B. Rs 27,000.00
C. Rs 90.00
D. Rs 90.00
Answer: Option A
907. A situation in which an
outside group solicit proxies to
take control of business is
classified as
A. outside group
B. solicit process
C. proxy fight
D. controlled management
Answer: Option C
908. A stock which is issued
to meet specific needs of
company is considered as
A. classified stock
B. specific stock
C. needed stock
D. meeting stock
Answer: Option A
909. Corporations such as
Citigroup, American Express
and Fidelity are classified as
A. financial services
corporations
B. common service corporations
C. preferred service corporations
D. commercial service
corporations
Answer: Option A
910. Financial corporations
which serve individual savers
and commercial mortgage
borrowers are classified as
A. savings associations
B. loans associations
C. preferred and common
associations
D. savings and loans
associations
Answer: Option D
69
911. A regulatory body which
licenses brokers and oversees
traders is classified as
A. international firm of auction
system
B. international association of
network dealers
C. national firm of equity
dealers
D. national association of
securities dealers
Answer: Option D
912. Companies take savings
as premium, invest in bonds
and make payments to
beneficiaries are classified as
A. debit unions
B. life insurance companies
C. credit unions
D. auto purchases
Answer: Option B
913. Federal government tax
revenues if it exceeds
government spending then it is
classified as
A. budget surplus
B. budget deficit
C. Federal Reserve
D. federal budget
Answer: Option A
914. Mutual fund allows
investors to sale out their
share during any normal
trading hours is classified as
A. exchange traded fund
B. management expense
C. money trade fund
D. capital trade fund
Answer: Option A
915. Step in initial public
offering in which hired agents
act on behalf of owners is
classified as
A. hiring problems
B. agency problems
C. corporation internal problems
D. corporation external
problems
Answer: Option B
916. Financial security which
is tax exempted and issues by
state governments to
individuals is classified as
A. U.S treasury bonds
B. mortgages
C. municipal bonds
D. corporate bonds
Answer: Option C
917. A company sells its stock
shares for raising more equity
capital is classified as
A. dealer communication
offering
B. seasoned equity offering
C. electronic equity offering
D. electronic order offering
Answer: Option B
918. All partners have limited
liability in
A. unlimited liability partnership
B. limited liability partnership
C. controlled partnership
D. uncontrolled partnership
Answer: Option B
919. Markets dealing with
residential loans, industry real
estate loans, agricultural loans
and commercial loans are
called
A. residential markets
B. mortgage markets
C. agriculture markets
D. commercial markets
Answer: Option B
920. Type of financial
security in which loans are
secured by borrower's
property is classified as
A. municipal bonds
B. corporate bonds
C. U.S treasury bonds
D. mortgages
Answer: Option D
921. In financial markets,
period of maturity more than
five years of financial
instruments is classified as
A. intermediate term
B. capital term
C. short-term
D. long-term
Answer: Option D
922. Merrill Lynch, Morgan
Stanley and Credit Suisse
Group plan for raising capital
is classified as
A. investment banking houses
B. exchange houses
C. transfer houses
D. foreign exchange houses
Answer: Option A
923. Trading procedures
dimensions include
A. location dimension
B. method of matching orders
C. price dimension
D. Both A and B
Answer: Option D
70
924. Trading place where
traders meet one another to
communicate is classified as
A. outcry auction system
B. outcry system
C. face to face communication
D. money communication
Answer: Option A
925. Rate of return which is
asked by investors is classified
as
A. average cost of capital
B. mean cost of capital
C. weighted cost of capital
D. weighted average cost of
capital
Answer: Option D
926. Characteristic of
corporation that it can
continue its work even owners
are decreased can be classified
as
A. limited life
B. unlimited life
C. corporate life
D. deceased partnership
Answer: Option B
927. Type of financial
securities that matures in less
than a year are classified as
A. money market securities
B. capital market securities
C. saving intermediaries
D. discounted intermediaries
Answer: Option A
928. Conglomerates that
combine many financial
institutions within a single
corporation are classified as
A. preferred service
corporations
B. commercial service
corporations
C. financial services
corporations
D. common service corporations
Answer: Option C
929. Corporations that buy
financial instruments with
money accepted from savers
are classified as
A. debit funds
B. credit funds
C. mutual funds
D. insurance funds
Answer: Option C
930. Corporate associations
who have common bonds
being employees of same firm
are classified as
A. credit unions
B. debit unions
C. preferred unions
D. solving unions
Answer: Option A
931. Set of rules made by
corporation founders such as
directors election procedure
are classified as
A. stock laws
B. by laws
C. liability laws
D. corporate laws
Answer: Option B
932. Risk of doing business in
particular country and arises
from foreign investments is
classified as
A. country risk
B. foreign risk
C. proffered risk
D. common risk
Answer: Option A
933. Markets which bring
closer institutions needing
funds and with surplus funds
are classified as
A. financial markets
B. corporate institutions
C. hedge firms
D. retirement planners
Answer: Option A
934. Process of selling
company stock at large to
general public and get lending
from banks is classified as an
A. initial public offering
B. external public offering
C. internal public offering
D. unprofessional offering
Answer: Option A
935. Partners who are only
liable for their own part of
investment are considered as
A. venture partners
B. corporate partners
C. limited partners
D. general partners
Answer: Option C
936. Sales revenue Rs 90,000,
operating taxes Rs 30,000 and
operating capital Rs 15,000
then value of free cash flows
will be
71
A. Rs 45,000.00
B. Rs 13,500.00
C. Rs 65,000.00
D. Rs 75,000.00
Answer: Option A
937. Legal entity separation
from its legal owners and
managers with help of state
laws is classified as
A. controlled corporate business
B. Corporation
C. limited corporate business
D. unlimited corporate business
Answer: Option B
938. Cost of money is affected
by factors which includes
A. production opportunities
B. risk
C. all of above
D. inflation
Answer: Option D
939. Markets in which
corporations raise capital for
creating market transaction
which are classified as
A. commercial markets
B. residential markets
C. primary markets
D. consumer credit loans
Answer: Option C
940. Notes, mortgages, bonds,
stocks, treasury bills and
consumer loans are classified
as
A. financial instruments
B. capital assets
C. primary assets
D. competitive instruments
Answer: Option A

941. Set of rules consisting of
behavior towards its directors,
creditors, shareholders,
competitors and community is
considered as
A. agency governance
B. hiring governance
C. corporate governance
D. external governance
Answer: Option C
942. New York Stock
Exchange and Nada stock
market are classified as types
of
A. primary stock market
B. equity market
C. secondary stock market
D. public offering market
Answer: Option C
943. Price for debt is called
A. debt rate
B. investment return
C. discount rate
D. interest rate
Answer: Option D
944. In corporation
characteristics, an easy
transferring and division of
stock of shares is classified as
A. ownership interest
transferability
B. deceased transferability
C. shared division
D. deceased division
Answer: Option A
945. In financial markets,
period of maturity less than
one year of financial
instruments is classified as
A. short-term
B. long-term
C. intermediate term
D. capital term
Answer: Option A
946. Condition in which
company's imports are more
than its exports is classified as
A. foreign trade
B. foreign trade deficits
C. foreign trade surplus
D. trade surplus
Answer: Option B
947. A markets which deals
with long-term corporate
stocks are classified as
A. liquid markets
B. short-term markets
C. capital markets
D. money markets
Answer: Option C
948. Subset of primary
market where firms go
publicly by issuing stocks in
financial markets is
considered as
A. initial public offering market
B. stock market
C. issuance market
D. First stock market
Answer: Option A
949. Corporate governance
charter of rules of behaving is
applicable on
A. competitors
B. shareholders
72
C. directors
D. all of above
Answer: Option D
950. Limited partners in
partnership business have
A. no control
B. whole control
C. corporate authority
D. general authority
Answer: Option A
951. A type of business
ownership in which two or
more entities join together for
profit purpose is classified as
A. partnership
B. joint business
C. joint profit
D. corporate business
Answer: Option A
952. Bonds issued to
individuals by corporations
are classified as
A. municipal bonds
B. corporate bonds
C. U.S treasury bonds
D. mortgages
Answer: Option B
953. Financial security in
which there is no default risk
and issues by U.S governments
is classified as
A. U.S treasury bonds
B. mortgages
C. municipal bonds
D. corporate bonds
Answer: Option A
954. Financial security issues
by major banks and risk
depends on strength of issuer
is classified as
A. negotiable certificate of
deposit
B. mutual funds
C. U.S treasury bills
D. commercial paper
Answer: Option A
955. An unlimited liability is
classified as liabilities of the
A. limited partners
B. general partners
C. venture partners
D. corporate partners
Answer: Option B
956. Financial security kept
by non-financial corporations
is
A. deposit cheque
B. distribution cost
C. short term treasury bills
D. short term capital cost
Answer: Option C
957. A retirement plans
funded for workers by
corporations, administered
and commercial banks are
classified as
A. retirement funds
B. pension funds
C. future funds
D. workers funds
Answer: Option B
958. Markets dealing loans of
autos, education, vacations
and appliances are considered
as
A. consumer credit loans
B. commercial markets
C. residential markets
D. mortgage markets
Answer: Option A
959. Type of partnership in
which liabilities are limited for
business owners is classified as
A. unlimited partnership
B. limited partnership
C. joint corporate
D. joint venture
Answer: Option B
960. Financial security issued
by banks operating outside
U.S is classified as
A. dollar bonds
B. euro deposits
C. Eurodollar market deposits
D. euro bonds
Answer: Option C
961. Value of free cash flows
Rs55000, operating cost and
taxes Rs30000, then value of
sales revenues (in Rs) will be
A. Rs 25,000.00
B. Rs 85,000.00
C. Rs 35,000.00
D. Rs 45,000.00
Answer: Option B
962. Markets which deal with
buying and selling of bonds,
mortgages, notes and stocks
are considered as
A. financial instruments
B. financial asset markets
C. physical asset markets
D. easy markets
Answer: Option B
73
963. Capital gain expected by
stockholders and dividends
are included in
A. debt rate
B. investment return
C. interest rate
D. cost of equity
Answer: Option D
964. Markets where assets
are bought or sold within a
few days or at some future
dates are classified as
A. spot markets
B. future markets
C. Both A and B
D. financial instruments
Answer: Option C
965. Default free financial
security sells by U.S treasury
is classified as
A. U.S treasury bills
B. commercial paper
C. certificate of deposit
D. mutual funds
Answer: Option A
966. Relevant information
about stock market price if it
is given, then this price is
called
A. market price
B. intrinsic price
C. extrinsic price
D. unstable price
Answer: Option B
967. Reduced consumer
demand for loans, homes and
new automobiles is result of
A. less disposable income
B. high disposable income
C. federal disposable income
D. discount disposable income
Answer: Option A
968. Formula Sales revenue
minus operating cost and taxes
minus operating capital
investments is used to
calculate
A. available income
B. cash income
C. free cash flows
D. free distribution
Answer: Option C
969. An attitude of investor
towards dealing with risk
determines the
A. rate of return
B. rate of exchange
C. rate of intrinsic stock
D. rate of extrinsic stock
Answer: Option A
970. Firm's which helps in
indirect transfer such as
Merrill Lynch is classified as
A. investment banking house
B. investment bank
C. saving house
D. saving bank
Answer: Option A
971. In Corporation
characteristics, losses are
subject to funds invested
actually is considered as
A. limited liability
B. unlimited liability
C. general liability
D. controlled ownership liability
Answer: Option A
972. Government spending, if D. corporation
it exceeds federal government Answer: Option D
tax revenues then it is
classified as
A. Federal Reserve
B. federal budget
C. budget surplus 977. Banks such as Bank of
D. budget deficit America serves a range of
Answer: Option D savers and borrowers are
classified as
A. transfer banks
B. commercial banks
C. serving banks
973. Financial security with D. nation's banks
low degree risk and Answer: Option B
investment held by businesses
is classified as
A. treasury bills
B. commercial paper
C. negotiable certificate of 978. An inexpensive and easy
deposit business formation and few
D. money market mutual funds government regulations are
Answer: Option D advantages of
A. Private Corporation
B. personal ownership
C. proprietorship
D. personal business
974. Type of financial Answer: Option C
security in which firms do not
borrow money rather lease
their assets is classified as
A. leases
B. preferred stocks 979. Document in a
C. common stocks corporation which consists of
D. corporate stocks amount of stock, name and
Answer: Option A addresses of directors is
classified as
A. liability plan
B. stock planning
C. corporation paperwork
975. New York Stock D. charter
Exchange' is an example of Answer: Option D
A. capital markets
B. money markets
C. liquid markets
D. short-term markets
Answer: Option A 980. A price for equity is
called
A. interest rate
B. cost of equity
C. debt rate
976. Hewlett-Packard and D. investment return
Microsoft are examples of Answer: Option B
A. limited corporate business
B. unlimited corporate business
C. controlled corporate business
74

981. Risk in which value of
investment depends on what
happens to foreign exchange
rates is classified as
A. preferred risk
B. exchange rate risk
C. country risk
D. foreign risk
Answer: Option B
982. Members and employees
of credit unions are loaned for
A. mortgages
B. home improvement loans
C. auto purchases
D. all of above
Answer: Option D
983. Ability to trade at net
price very quickly is classified
as
A. original trading
B. liquidity
C. offline trading
D. fixed price trading
Answer: Option B
984. Bonds which are more
risky than corporate bonds
and are issued by major
corporations are classified as
A. common stocks
B. corporate stocks
C. leases
D. preferred stocks
Answer: Option D
985. In financial markets,
period of maturity within one
to five years of financial
instruments is classified as
A. short-term
B. long-term
C. intermediate term
D. capital term
Answer: Option C
986. Collection of money
from investors and spending
money in other investment
activities is classified as
A. future funds
B. hedge funds
C. retirement funds
D. pension funds
Answer: Option B
987. Markets for products
such as wheat, rice, cotton,
real estate and autos dealing is
classified as
A. physical asset markets
B. intangible assets
C. competitive markets
D. easy markets
Answer: Option A
988. Price of stock that
companies observe in financial
markets is called
A. market price
B. intrinsic price
C. extrinsic price
D. fundamental price
Answer: Option A
989. Professionals such as
doctors, accountants and
lawyers often make
corporations are classified as
A. general professionals
B. Professional Corporation
C. professional association
D. Both B and C
Answer: Option D
990. Markets which deals
with high liquid and short
term debt securities are
classified as
A. capital markets
B. money markets
C. liquid markets
D. short-term markets
Answer: Option B
991. Low default-risk
security issued by financially
secure firms is classified as
A. U.S treasury bills
B. commercial paper
C. certificate of deposit
D. mutual funds
Answer: Option B
992. Firm's promise to pay
and is backed or guaranteed
by bank is classified as
A. customer's acceptance
B. banker's acceptance
C. federal acceptance
D. treasury acceptance
Answer: Option B
75
993. Financial markets
include
A. primary markets
B. capital markets
C. physical asset markets
D. all of above
Answer: Option D
994. Funds which are used as
an interest-bearing checking
accounts are classified as
A. money market funds
B. capital market funds
C. money mutual funds
D. insurance money funds
Answer: Option A
995. Physical location
exchange or telephone
networks are types of
A. long-term markets
B. secondary markets
C. money markets
D. capital markets
Answer: Option B
996. Method of matching
orders by posting orders of
buying and selling is classified
as
A. electronic communication
network
B. electronic dealer network
C. electronic stock network
D. electronic order network
Answer: Option A
997. An earning of business
which is available for free
distribution to all stockholders
and creditors is classified as
A. free cash flows
B. free distribution
C. available income
D. cash income
Answer: Option A
998. Business owned by a
single person in
unincorporated way is called
A. proprietorship
B. personal business
C. Private Corporation
D. personal ownership
Answer: Option A
999. Loans by finance
companies, banks and credit
unions is classified as
A. consumer credit loans
B. dollar bonds
C. Eurodollar market deposits
D. euro bonds
Answer: Option A
1000. Bonds issue by
corporations which are more
risky than preferred stocks
are classified as
A. leases
B. preferred stocks
C. common stocks
D. corporate stocks
Answer: Option C
1005. Money lends to
corporations by banks is
classified as
A. Eurodollar market deposits
B. commercial loans
C. consumer credit loans
D. consumer credit loans
Answer: Option B
1006. Markets in which
outstanding securities are
traded by investors are
classified as
A. primary markets
B. secondary markets
C. initial public offering market
D. stock market
Answer: Option B

1001. Federal Reserve policy

and federal surplus or deficit
of budget affect the
A. cost of production
B. cost of money
C. opportunity cost
D. inflation risk
Answer: Option B
1002. Market where market
makers keep record of stock of
financial instruments is
classified as
A. stock market
B. dealer market
C. outcry auction system
D. face to face communication
Answer: Option B
1003. An unlimited liability
for business debts and less
capital for growth are
limitations of
A. proprietorship
B. personal business
C. Private Corporation
D. personal ownership
Answer: Option A
1004. Transfer through
institutions such as mutual
funds or banks are classified
as
A. non-financial intermediary
B. financial intermediary
C. savers intermediary
D. discounted intermediary
Answer: Option B

76