Beruflich Dokumente
Kultur Dokumente
20. In a well-functioning markets two investments that offer the same payoff must have
the same
(A) beta
(B) return
(C) risk
(D) price
21. The mixture of debt and equity, used to finance a corporation is also known as
(A) capital structure
(B) capital budgeting
(C) investing
(D) treasury
22. The present value of $100 expected in two years from today at a discount rate of
5% is
(A) $105
(B) $110.7
(C) $95
(D) $90.7
23. What will be value of $100 after two years, if the interest rate during this period is
5%?
(A) $105
(B) $107.5
(C) $110.25
(D) $95
24. Investors require higher return on
(A) levered equity
(B) unlevered equity
(C) both levered and unlevered
(D) bond equity
25. In a well-functioning capital market if the firm pays no taxes then what is better
about borrowing?
(A) Borrowing is not a good idea in this case
(B) No difference who (firm or shareholders) borrows
(C) It is better that the firm borrows
(D) It is better that the shareholders borrow
30. An asset that pays a fixed amount of cash each year for a specified number of years
is called
(A) perpetuity
(B) dividend
(C) liquidity
(D) annuity
33. The ratio between the amount of profit and investment is called the
(A) NPV
(B) opportunity cost
(C) risk premium
(D) rate of return
35. Governments and corporations issue bonds to
(A) borrow money
(B) lend money
(C) both A and B
(D) none of these
37. At maturity the bond holders get back their principal. The principal is called
(A) coupon
(B) face value
(C) yield
(D) return
38. Any economic resource that can produce economic value to the holder is called
(A) asset
(B) return
(C) maturity
(D) yield
44. If the daily prices of a stock on 20 and 21 January are 90 and 100 respectively, then
what is the daily rate of return?
(A) 9.9%
(B) 10.10%
(C) 11.11%
(D) 12.12%
51. If two firms in the same line of business merge together, it is called __________
merger.
(A) horizontal
(B) vertical
(C) straight
(D) conglomerate
52. If two firms at different stages of production merge together, it is called __________
merger.
(A) horizontal
(B) vertical
(C) straight
(D) conglomerate
53. If two firms in unrelated line of business merge together, it is called __________
merger.
(A) horizontal
(B) vertical
(C) straight
(D) conglomerate
54. The measure for calculating how much two random variable change together is
called
(A) variance
(B) covariance
(C) skewness
(D) kurtosis
56. Suppose our portfolio consists of two stocks A and B. What should be the
correlation between them so that we have no risk in our portfolio?
(A) –1
(B) 0
(C) 1
(D) risk cannot be eliminated
57. In the beginning, some companies receive equity investment from wealthy
individuals. The wealthy individuals are called
(A) angel investors
(B) corporate investors
(C) venture capitalists
(D) venture capital firms
58. Firms that invest in new companies as they try to grow are called
(A) spinning
(B) underwriters
(C) venture capitalists
(D) venture capital firms
59. An investor will receive $5,000 and $10,000 after one and two years from today
respectively. If the interest rate during this period is 10% then what is the present value
of this cash flow?
(A) $12000
(B) $12450
(C) $12810
(D) $13705
60. What is volatility if the duration of a bond is 4 years and yield to maturity is 8%?
(A) 3.1%
(B) 3.4%
(C) 3.7%
(D) 4.0%
64. If beta of a stock is __________ then it tends to amplify the overall market
movement.
(A) 0
(B) 1
(C) greater than 1
(D) between 0 and 1
65. What is the real rate of interest if nominal rate is 10% and inflation rate is 5%?
(A) 4.3%
(B) 4.8%
(C) 5.3%
(D) 5.8%
ANSWERS: FINANCE MULTIPLE CHOICE QUESTIONS
61. (A) managers
62. (C) raise more cash
63. (B) underwriters
64. (C) greater than 1
65. (B) 4.8%
66. The relationship between short and long term interest rates is called __________ of
interest rates.
(A) yield to maturity
(B) duration
(C) volatility
(D) term structure
74. The interest rate earned if a financial asset is held until its maturity is called
(A) term structure
(B) spinning
(C) yield
(D) spread
75. The price of a stock is $100, and it could be $95 or $115 the next year. What is the
expected return?
(A) 5%
(B) 6%
(C) 7%
(D) 7.5%
76. The price of a stock is $100, and there are 40% chances that it would be $95 and
60% chances that it would be $115 the next year. What is the expected return?
(A) 5%
(B) 6%
(C) 7%
(D) 7.5%
77. A company’s agreement with the underwriter include
(A) spread
(B) greenshoe option
(C) A and B
(D) whiteshoe option
78. The long-run returns of Initial Public Offerings (IPOs) tend to __________ the
market.
(A) underperform
(B) accelerate
(C) amplify
(D) none of these
84. On 1 January you enter a contract to buy 1 million barrel of oil for $80 per barrel to
be delivered on 1 March. The price on 1 March is $82 per barrel. Your gain is
(A) $200
(B) $20000
(C) $200000
(D) $2000000
86. Which from the following issues has the lowest total direct cost?
(A) straight bonds
(B) corporate stocks
(C) all issues have same cost
(D) none of these
87. An option that allows the underwriter to increase the number of shares bought by
15% is called
(A) spread
(B) spinning
(C) whiteshoe
(D) greenshoe
88. A four year zero-coupon bond has 6% yield. What is its duration in years?
(A) 4
(B) 5
(C) 6
(D) 7
89. Changes in interest rates have a __________ impact on the prices of long-term
bonds than the short-term bonds.
(A) greater
(B) smaller
(C) both have same impact
(D) interest rate does not matter
90. An investment of $9,000 today will yield $10,000 after one year. What is the Net
Present Value if the interest rate is 10%?
(A) $71
(B) $81
(C) $91
(D) $101
91. The return that is forgone by investing in the project rather than investing in financial
markets at the same level of risk is called
(A) internal rate of return
(B) capital saving
(C) opportunity cost
(D) opportunity saving
92. The party that agrees to buy the underlying asset in a forward contract is said to
assumes
(A) forward position
(B) backward position
(C) long position
(D) short position
93. The party that agrees to sell the underlying asset in a forward contract is said to
assumes
(A) forward position
(B) backward position
(C) long position
(D) short position
94. If the spot price is $1200 and the exercise price is $1000 then the payoff of a party
assuming a long position is
(A) -$200
(B) $0
(C) $1
(D) $200
95. If the spot price is $1200 and the exercise price is $1000 then the payoff of a party
assuming a short position is
(A) –$200
(B) $0
(C) $1
(D) $200
96. If the co-variance between stock A and market returns is 12, and the standard
deviation of market returns is 3 then what is the value of beta?
(A) 0.96
(B) 1.0
(C) 1.33
(D) 1.45
99. If market price of the share at expiration is $100 and exercise price is $80, then
value of a call option at expiration is
(A) –$20
(B) $0
(C) $1
(D) $20
100. If market price of the share at expiration is $100 and exercise price is $80, then
value of a put option at expiration is
(A) –$20
(B) $0
(C) $1
(D) $20