Sunday, 7 April 2019


Finance Questions


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81. Which from the following statements is incorrect?
(A) A European option can only be exercised at expiry
(B) An American option can only be exercised at expiry
(C) A European option is a right but not obligation
(D) An American option is a right but not obligation
82. An agreement on a telephone or email to buy/sell an asset at an agreed future time for an agreed price is called
(A) spot contract
(B) forward contract
(C) future contract
(D) swap
83. When forward contract is traded on an exchange, it is called
(A) spot contract
(B) future contract
(C) call option
(D) put option
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
85. Allocating stock in popular new issues to manager of their important corporate clients is called
(A) subscription
(B) under-performance
(C) rights
(D) spinning
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
ANSWERS: FINANCE QUESTIONS
81. B
82. B
83. B
84. D
85. D
86. A
87. D
88. A
89. A
90. C

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Corporate Finance Multiple Choice Questions


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71. The difference between the public-offer price and the price paid by the underwriter is called
(A) underpricing
(B) spread
(C) commission
(D) margin
72. The underwriters receive their payments in the shape of
(A) underpricing
(B) spread
(C) commission
(D) margin
73. Rights issues are for
(A) managers
(B) directors
(C) existing shareholders
(D) new shareholders
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
79. Spread is __________ for IPOs.
(A) highest
(B) lowest
(C) average
(D) uncertain
80. The value of a financial derivative depends on the
(A) maturity
(B) duration
(C) forward interest rate
(D) underlying
ANSWERS: CORPORATE FINANCE MULTIPLE CHOICE QUESTIONS
71. B
72. B
73. C
74. C
75. A
76. C
77. C
78. A
79. A
80. D

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Finance Multiple Choice Questions


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61. The success of a new company critically depends on
(A) managers
(B) board of directors
(C) shareholders
(D) venture capitalists
62. Companies go public in order to
(A) avoid taxes
(B) reduce management cost
(C) raise more cash
(D) get merge
63. Companies go public with the help of
(A) venture capital firms
(B) underwriters
(C) shareholders
(D) A, B and C
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%
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
67. Financial managers are interested in __________ when see bond market.
(A) yield to maturity
(B) duration
(C) volatility
(D) term structure
68. Underwriters are also called
(A) bookrunner
(B) venture capitalists
(C) subscribers
(D) angel investors
69. Which from the following is not the role of an underwriter?
(A) They provide procedural and financial advice
(B) They buy the issue
(C) They resell the issue to the public
(D) They provide funds to the corporation
70. Risk __________ with the duration of bond.
(A) remains same
(B) increases
(C) decreases
(D) multiplied
ANSWERS: FINANCE MULTIPLE CHOICE QUESTIONS
61. A
62. C
63. B
64. C
65. B
66. D
67. A
68. A
69. D
70. B

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Corporate Finance MCQs


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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
55. The normalized version of covariance is called
(A) regression
(B) correlation
(C) cross-section
(D) spread
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%
ANSWERS: CORPORATE FINANCE MCQS
51. A
52. B
53. D
54. B
55. B
56. A
57. A
58. D
59. C
60. C

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Corporate Finance Quizzes


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41. The contribution of an individual security to the risk of a well-diversified portfolio is measured by?
(A) beta
(B) variance
(C) standard deviation
(D) CAPM
42. The sensitivity of an asset to the market movements is called
(A) beta
(B) variance
(C) standard deviation
(D) CAPM
43. The average beta of all stocks in a market is
(A) –1
(B) 0
(C) 1
(D) 1.5
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%
45. According to the MM proposition, dividend policy is
(A) correlated
(B) underperformed
(C) relevant
(D) irrelevant
46. In portfolio analysis __________ curves play an important role.
(A) circle
(B) ellipse
(C) parabola
(D) hyperbola
47. If stock prices increases, dividend yield
(A) also increases
(B) decreases
(C) remains same
(D) increases to one and a half
48. According to residual dividend policy, a firm should pay a dividend of all left over when
(A) zero NPV projects have been funded
(B) positive NPV projects have been funded
(C) projects with IRR equal to risk-free interest rate have been funded
(D) projects with IRR greater than risk-free interest rate have been funded
49. The value of probability is always between __________ (inclusive).
(A) –1 and 0
(B) 0 and 1
(C) –1 and 1
(D) none of these
50. The value of correlation is always between __________ (inclusive).
(A) –1 and 0
(B) 0 and 1
(C) –1 and 1
(D) none of these
ANSWERS: CORPORATE FINANCE QUIZZES
41. A
42. A
43. C
44. C
45. D
46. D
47. B
48. B
49. B
50. C

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Finance Quizzes


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31. Net Present Value is calculated as
(A) cash inflow – cash outflow
(B) cash outflow – cash inflow
(C) PV of cash inflow – PV of cash outflow
(D) PV of cash outflow – PV of cash inflow
32. An investment should be accepted if its NPV is
(A) 0
(B) 1
(C) positive
(D) negative
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
34. An investment should be accepted if
(A) Rate of Return > Opportunity Cost
(B) Rate of Return < Opportunity Cost
(C) Rate of Return = Opportunity Cost
(D) A, B and C are irrelevent
35. Governments and corporations issue bonds to
(A) borrow money
(B) lend money
(C) both A and B
(D) none of these
36. Regular interest payment to the bond holders is called
(A) principal
(B) coupon
(C) face value
(D) yield
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
39. A collection of assets held by an investor is called
(A) corporate bond
(B) random returns
(C) risk premium
(D) portfolio
40. The risk of a well-diversified portfolio depends on the __________ of the securities included in the portfolio.
(A) specific risk
(B) market risk
(C) both A and B
(D) none of these
ANSWERS: FINANCE QUIZZES
31. C
32. C
33. D
34. A
35. A
36. B
37. B
38. A
39. D
40. B

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Corporate Finance Quiz


Corporate Finance multiple choice question (MCQs) Page-3. These quizzes are from corporate finance, personal finance, and public finance. Find answers to the questions at the bottom of the page.

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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
26. Corporations can return cash to their shareholders by
(A) paying cash dividends
(B) stock repurchase
(C) both A and B
(D) none of these
27. Which from the following is true about stock repurchases?
(A) Repurchases are more flexible
(B) Repurchases are tax-advantaged
(C) both A and B
(D) none of these
28. What should be the goal of a corporation?
(A) to maximize the profit of the shareholders
(B) to maximize the value of the corporation
(C) both A and B
(D) to take care of the interests of the management
29. The money a investor receive for taking on a risk is called
(A) risk premium
(B) risk free rate
(C) option value
(D) arbitrage
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
ANSWERS: CORPORATE FINANCE QUIZ
21. A
22. D
23. C
24. A
25. B
26. C
27. C
28. C
29. A
30. D

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Finance Quiz


Finance multiple choice question (MCQs) Page-2. These quizzes are from corporate finance, personal finance, and public finance. Find answers to the questions at the bottom of the page.

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11. Generally, a corporation is owned by the
I. Managers
II. Board of Directors
III. Stock holders
IV. stake holders
(A) II only
(B) I and II
(C) III only
(D) III and IV
12. A firm’s investment decision is also called the
(A) financing decision
(B) capital budgeting decision
(C) liquidity decision
(D) none of these
13. Conflicts between shareholders and managers’ interest is called
(A) management problem
(B) area of the board of directors
(C) risk
(D) agency problem
14. In the principle-agent framework
(A) managers are the principals
(B) directors are the principals
(C) shareholders are the principals
(D) shareholders are the agents
15. The risk that can be eliminated by diversification is called
(A) specific risk
(B) security risk
(C) market risk
(D) beta
16. The risk that cannot be eliminated by diversification is called
(A) specific risk
(B) security risk
(C) market risk
(D) beta
17. Which from the following is the safest investment?
(A) Treasury bills
(B) Government bond
(C) Corporate bond
(D) Stocks
18. The spread of possible outcomes of an investment returns is measured by
(A) variance
(B) standard deviation
(C) skewness
(D) kurtosis
19. Risk is best judged in
(A) portfolio context
(B) individual security context
(C) both of these
(D) none of these
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
ANSWERS: FINANCE QUIZ
11. C
12. B
13. D
14. C
15. A
16. C
17. A
18. B
19. A
20. D

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Finance MCQs







Finance MCQs


Finance multiple choice question (MCQs) Page-1. These MCQs are from corporate finance, personal finance, and public finance. Find answers to the questions at the bottom of the page.

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1. Which from the following is NOT an example of intangible assets?
(A) Trademarks
(B) Patents
(C) Buildings
(D) Technical expertise
2. The following are the examples of financial assets except?
(A) Stocks
(B) Bank Loan
(C) Bond
(D) Raw material
3. The following are important functions of financial markets:
I. Source of financing
II. Provide liquidity
III. Reduce risk
IV. Source of information
(A) I and IV only
(B) II and III only
(C) I, II and III only
(D) I, II, III and IV
4. The sale of financial assets is also referred to as the
(A) Capital decision
(B) CFO decision
(C) Financing decision
(D) Investment decision
5. The construction of new manufacturing plant is also referred to as the
(A) Capital decision
(B) CFO decision
(C) Financing decision
(D) Investment decision
6. According to the Efficient Market Hypothesis, which from the following is NOT true?
(A) Analysis predicts price pattern
(B) No money machines
(C) No arbitrage opportunities
(D) Security prices reflect true underlying value of assets
7. According to the weak form of market efficiency __________ past information is included in the stock price.
(A) no
(B) all
(C) marginal
(D) only a few
8. We say about a particular investment that it is risky, because
(A) it is dangerous
(B) it has low returns
(C) its returns are uncertain
(D) its raw material is unavailable
9. In Finance, risk is calculated by calculating the
(A) mean
(B) variance
(C) standard deviation
(D) kurtosis
10. The sale of bonds by a country or a corporation is referred to as the
(A) Investment decision
(B) financing decision
(C) offering loan
(D) capital structure
ANSWERS: FINANCE MCQS
1. C
2. D
3. D
4. C
5. D
6. A
7. B
8. C
9. C
10. B

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