MCQ Bank
Which of the following is an example of a macroeconomic factor that might be included in a multifactor model?
- A) Firm size
- B) Dividend yield
- C) Price-to-earnings ratio
- D) Changes in inflation
A bond's Yield to Maturity (YTM) is 6% while its coupon rate is 7%; this bond will be categorized as:
- A) All of the given bonds
- B) Discount bond
- C) Premium Bond
- D) Par value bond
Which one of the following bonds provides an option for bondholders to retire or extend the bond?
- A) Puttable bonds
- B) Inverse Floaters bonds
- C) Catastrophe Bonds
- D) Corporate bonds
Which of the following statements is true about the CAPM?
- A) CAPM assumes that investors are only concerned with unsystematic risk.
- B) CAPM assumes that investors can borrow and lend at the risk-free rate.
- C) CAPM does not consider the risk-free rate in its calculations.
- D) CAPM is only applicable to portfolios, not individual securities.
Market Value Added (MVA) reflects the difference between:
- A) Earnings
- B) Value
- C) Equity
- D) Capital
Which of the following equations is correct regarding economic profit?
- A) Economic profit = Cash flows + market value
- B) Economic profit = Cash flows + economic depreciation
- C) Economic profit = Cash flows - ( recent market value + previous market value )
- D) Economic profit = Cash flows + market value
Which of the following is true about the slope of the Capital Market Line (CML)?
- A) It represents the risk-free rate.
- B) It represents the market risk premium per unit of risk.
- C) It represents the covariance between the risk-free asset and the market portfolio.
- D) It represents the total risk of the market portfolio.
Which of the following statements is correct regarding the financial lease?
- A) Lessee agrees to maintain the asset up to 75% of its worth, insure it, and pay any property taxes
- B) Lessor agrees to maintain the asset up to 75% of its worth, insure it, and pay any property taxes
- C) Lessor agrees to maintain the asset, insure it, and pay any property taxes
- D) Lessee agrees to maintain the asset, insure it, and pay any property taxes
Which date determines whether a shareholder is eligible to receive a declared dividend?
- A) Record
- B) Declaration
- C) Payable
- D) Ex-dividend
According to real option theory, ____________ is the primary advantage of delaying investment decisions.
- A) flexibility
- B) arbitrage
- C) liquidity
- D) leverage
Which of the following options trading strategies involves buying a stock and writing a call on the same stock?
- A) naked
- B) covered
- C) straddle
- D) spread
In case of perfect capital markets, the value of a firm does not depend upon:
- A) The market risk prevailing in the economy
- B) It's project cash flows
- C) The risk-free rate
- D) It’s capital structure
________________ reduce the income available to equity holders but increase the total amount available to all investors.
- A) Corporate taxes
- B) Macroeconomic factors
- C) Debt obligations
- D) Retained earnings
When a firm uses debt financing, ________________ is offset to some extent by the tax savings from the interest tax shield.
- A) The cost of spontaneous financing
- B) The cost of equity
- C) The required rate of return by shareholders
- D) The cost of interest
___________ can be seen as the primary benefit of employee stock options from a corporate finance perspective.
- A) Leverage
- B) Alignment
- C) Liquidity
- D) Risk
Analysts find different valuation methods by which a firm can be sold. Which of the following methods takes care of the market value of assets?
- A) Tobin’s Q method
- B) Replacement cost method
- C) All of the given
- D) Liquidation value method
With perfect capital markets, ___________________ shifts the ownership of the firm from equity holders to debt holders without changing the total value available to all investors.
- A) Retained earnings
- B) Initial public offerings
- C) Management
- D) Bankruptcy
Which of the following statements is not correct regarding the yield curve?
- A) A downward-sloping yield curve may indicate short-term rate is going to be higher
- B) Spot rate that prevails today for a given maturity
- C) The short rate is the rate for a given maturity at different points in time
- D) All of the given options
If an option’s strike price is lower than the current stock price, the option is considered _____________.
- A) at-par
- B) in-the-money
- C) out-of-money
- D) neutral
A company has earnings before interest and taxes of Rs. 500,000 and interest expense of Rs. 50,000. The tax rate is 30%. What will be the net income?
- A) Rs. 350,000
- B) Rs. 315,000
- C) Rs. 385,000
- D) Rs. 165,000