Business Finance MCQs

Question 1

The weighted average of possible returns, with the weights being the probabilities of occurrence is referred to as . . . . . . . .

Accepted Answer

Expected return

Answer

Probability distribution

Answer

Standard deviation

Answer

Coefficient of variation

Question 2

The cost of capital of a firm is

Accepted Answer

The minimum rate of return it must earn on investments to keep its investors satisfied

Answer

The dividend paid on the equity capital

Answer

The weighted average of the cost of various longterm and short-term sources of finance

Answer

The average rate of return it must earn on investments to satisfy the investors

Question 3

Which of the following is the variability of return on stocks or portfolios associated with changes in return on the market as a whole?

Accepted Answer

Systematic risk

Answer

Standard deviation

Answer

Unsystematic risk

Answer

Coefficient of variation

Question 4

The modern approach to financial management is (i) The total fund requirement of the firm. (ii) The asset to be acquired. (iii) The payment of dividend to the shareholders.

Accepted Answer

(i), (ii) and (iii)

Answer

(i) only

Answer

(ii) only

Answer

(ii) and (iii)

Question 5

A Crawling Peg System means

Accepted Answer

Hybrid of Fixedand Floating Exchange System

Answer

Fixed Exchange Rate System

Answer

Floating Exchange Rate System

Answer

None of the above

Question 6

The time value of money supports the comparison of cash flows recorded at different time period by

Accepted Answer

Using either A or B

Answer

Discounting all cash flows to a common point of time

Answer

Compounding all cash flows to a common point of time

Answer

None of the above

Question 7

Which one of the following is the main objective of IFCI?

Accepted Answer

To provide medium and long-term financial assistance to industrial undertakings, particularly in those circumstances in which banking accommodation is inappropriate or resource to the capital market is impracticable

Answer

To offer small and large investors the means of acquiring shares in the widening prosperity resulting from the steady industrial growth of the country

Answer

To upgrade technology modernization and promote the marketing of products of the small-scale sector

Answer

To serve as the apex institution for term finance for the industry with coordination, regulation, and supervision of the working of other financial institution

Question 8

Which combination represents the assumptions of Walter's Dividend Model? I. The company has a very long or perpetual life. II. All earnings are either reinvested internally or distributed as dividend. III. There is no floatation cost for the company. IV. The cost of capital of the company is constant.

Accepted Answer

I, II, IV

Answer

I, III, IV

Answer

III, IV

Answer

I, III, V

Question 9

Identity the incorrect statement from the following:

Accepted Answer

Broken-date contract is a full-month forward contract

Answer

Currency arbitrage refers to making a profit by buying a currency cheap in one market and selling it dear in the other market at a particular point of time

Answer

Currency Futures Market refers to organized foreign exchange market where a fixed amount of a currency is exchanged on a fixed maturity date in the pit

Answer

Currency Options Market refers to the market for the exchange of currency where the option buyer enjoys the privilege of not exercising the option if the rate is not favourable