MCQ Bank
In which type of the market, securities are originally sold to the investors?
- A) Primary Market
- B) Tertiary Market
- C) None of the given options
- D) Secondary Market
What will be the price per share if there is a current dividend of Rs. 4.75, required rate of return of 12% and growth rate of 5%?
- A) Rs. 30.19
- B) Rs. 56.53
- C) Rs. 43.52
- D) Rs. 71.25
Which one of the following formulas can be used to calculate Operating Cash Flow (OCF) under tax shield approach?
- A) OCF = (sales – cost) x (1 + tax rate) + (depreciation x tax rate)
- B) OCF = (sales + cost) x (1 – tax rate) + (depreciation x tax rate)
- C) OCF = (sales – cost) x (1 – tax rate) – (depreciation x tax rate)
- D) OCF = (sales – cost) x (1 – tax rate) + (depreciation x tax rate)
Which of the following is affected by financial leverage?
- A) Sales
- B) None of the given options
- C) Production
- D) Shareholders' profit
Standard deviations for Investment A and Investment B are 25% and 12% respectively. This indicates that :
- A) Investment A is less volatile than Investment B
- B) Investment A is more volatile than Investment B
- C) Investment B is more volatile than Investment A
- D) Investment B is equally volatile to Investment A
The total market value of a company’s stocks is calculated as Rs. 250 million and the total market value of the company’s debt are calculated as Rs. 150 million. What percent of the firm’s financing is equity ?
- A) 62.50%
- B) 33.33%
- C) 50.00%
- D) 85.00%
What will be the weighted average cost of capital if a firm's capital structure has 55% debt and 45% common equity; while, after-tax cost for debt is 8% and the cost of common equity is 15%?
- A) 11.15 %
- B) 9.91 %
- C) 10.40 %
- D) 10.54 %
Which of the following best describes dividend yield?
- A) It tells that how much interest is earned on each unit deposited in a broker account
- B) It tells that how much tax is paid for each unit invested in a company’s shares
- C) It tells that how much income is earned for each unit invested in a company’s shares
- D) It tells that how much tax is paid on each unit deposited in a broker account
A firm’s equity is worth 4 million and its debt is worth 2 million. What is the percentage of firm’s financing that is equity ?
- A) 67%
- B) 40%
- C) 20%
- D) 33%
Which of the following is the return that firm’s creditors demand on new borrowings ?
- A) Cost of debt
- B) Cost of preferred stock
- C) Cost of common equity
- D) Cost of retained earnings
Variability of return means to which extent returns change around a/an ---------------:
- A) Average Return
- B) Maximum Return
- C) Minimum Return
- D) Expected Return
Dividend received on stocks held by an investor is called:
- A) Total Return
- B) Income yield
- C) Capital yield
- D) Total profit
Which of the following refers to the use of borrowed money to increase the return on equity of an investment purchase ?
- A) Financial Leverage
- B) None of the given options
- C) Operating Leverage
- D) Structural Leverage
Total portfolio risk is equal to :
- A) systematic risk plus market risk
- B) unsystematic risk plus diversifiable risk
- C) systematic risk plus non-diversifiable risk
- D) systematic risk plus diversifiable risk
Which of the following term refers to the situation when investors loan out the money ?
- A) Leverage
- B) Loaning
- C) Levering
- D) Un-levering
Preferred stock is a hybrid security because it possesses the features of both _________ and _________.
- A) Preferred stock; Debt
- B) Common stock; Debt
- C) Treasury bills; Bonds
- D) Common stock; Treasury bills
The total market value of a company’s stocks is calculated as Rs. 250 million and the total market value of the company’s debt are calculated as Rs. 100 million. What percent of the firm’s financing is debt ?
- A) 28.57%
- B) 50.00%
- C) 70.00%
- D) 62.50%
Which of the following is known as the group of assets such as stocks and bonds held by an investor ?
- A) Stock Bundle
- B) Capital Structure
- C) None of the given options
- D) Portfolio
Which one of the following is "NOT" a component of Cost of Capital?
- A) Cost of underwriting
- B) Cost of preferred stock
- C) Cost of debt
- D) Cost of equity
Suppose currently risk-free investments are offering 12% whereas the particular investment is offering 18%. What is the risk premium?
- A) 8%
- B) 6%
- C) 30%
- D) 12%