laboursonline – MCQs, Mock Tests | NTS NTS CURRENT AFFAIRS FINANCE MCQ SET 2

The following are the examples of financial assets except?

1. Stocks
2. Bank loan
3. Bond
4. Raw material

✅ Correct Answer: 4

The sale of financial assets is also referred to as the

1. Capital decision
2. CFO decision
3. Financing decision
4. Investment decision

✅ Correct Answer: 3

The construction of new manufacturing plant is also referred to as the

1. Capital decision
2. CFO decision
3. Finacing decision
4. Investment decision

✅ Correct Answer: 4

According to the Efficient Market Hypothesis, which from the following is NOT true?

1. Analysis predicts price pattern
2. No money machines
3. No arbitrage opportunities
4. Security prices reflect true underlying value of assets

✅ Correct Answer: 1

According to the weak form of market efficiency __________ past information is included in the stock price.

1. no
2. all
3. marginal
4. only a few

✅ Correct Answer: 2

We say about a particular investment that it is risky, because

1. it is dangerous
2. it has low returns
3. its returns are uncertain
4. its raw material is unavailable

✅ Correct Answer: 3

In Finance, risk is calculated by calculating the

1. mean
2. variance
3. standard deviation
4. kurtosis

✅ Correct Answer: 3

The sale of bonds by a country or a corporation is referred to as the

1. Investment decision
2. financing decision
3. offering loan
4. capital structure

✅ Correct Answer: 2

The cost of an item is $100. The seller has a mark-up of 20%. What is the selling price?

1. $80
2. $100
3. $120
4. $140

✅ Correct Answer: 3

A firms investment decision is also called the

1. financing decision
2. capital budgeting decision
3. liquidity decision
4. none of these

✅ Correct Answer: 2

Conflicts between shareholders and managers interest is called

1. management problem
2. area of the board of directors
3. risk
4. agency problem

✅ Correct Answer: 4

In the principle-agent framework

1. managers are the principals
2. directors are the principals
3. shareholders are the principals
4. shareholders are the agents

✅ Correct Answer: 3

The risk that can be eliminated by diversification is called

1. specific risk
2. security risk
3. market risk
4. beta

✅ Correct Answer: 1

Which from the following is the safest investment?

1. Treasury bills
2. Government bond
3. Corporate bond
4. Stocks

✅ Correct Answer: 1

The spread of possible outcomes of an investment returns is measured by

1. variance
2. standard deviation
3. skewness
4. kurtosis

✅ Correct Answer: 2

Risk is best judged in

1. portfolio context
2. individual security context
3. both of these
4. none of these

✅ Correct Answer: 1

In a well-functioning markets two investments that offer the same payoff must have the same

1. beta
2. return
3. risk
4. price

✅ Correct Answer: 4

The mixture of debt and equity, used to finance a corporation is also known as

1. capital structure
2. capital budgeting
3. investing
4. treasury

✅ Correct Answer: 1

The present value of $100 expected in two years from today at a discount rate of 5% is

1. $105
2. $110.7
3. $95
4. $90.7

✅ Correct Answer: 4

What will be value of $100 after two years, if the interest rate during this period is 5%?

1. $105
2. $107.5
3. $110.25
4. $95

✅ Correct Answer: 3

Investors require higher return on

1. levered equity
2. unlevered equity
3. both levered and unlevered
4. bond equity

✅ Correct Answer: 1

In a well-functioning capital market if the firm pays no taxes then what is better about borrowing?

1. Borrowing is not a good idea in this case
2. No difference who (firm or shareholders) borrows
3. It is better that the firm borrows
4. It is better that the shareholders borrow

✅ Correct Answer: 2

Corporations can return cash to their shareholders by

1. paying cash dividends
2. stock repurchase
3. both A and B
4. none of these

✅ Correct Answer: 3

Which from the following is true about stock repurchases?

1. Repurchases are more flexible
2. Repurchases are tax-advantaged
3. both A and B
4. none of these

✅ Correct Answer: 3

What should be the goal of a corporation?

1. to maximize the profit of the shareholders
2. to maximize the value of the corporation
3. both A and B
4. to take care of the interests of the management

✅ Correct Answer: 3

The money a investor receive for taking on a risk is called

1. Risk premium
2. risk free rate
3. option value
4. arbitrage

✅ Correct Answer: 1

An asset that pays a fixed amount of cash each year for a specified number of years is called

1. perpetuity
2. dividend
3. liquidity
4. annuity

✅ Correct Answer: 4

Net Present Value is calculated as

1. cash inflow - cash outflow
2. cash outflow - cash inflow
3. PV of cash inflow - PV of cash outflow
4. PV of cash outflow - PV of cash inflow

✅ Correct Answer: 3

An investment should be accepted if its NPV is

1. 0
2. 1
3. positive
4. negative

✅ Correct Answer: 3

The ratio between the amount of profit and investment is called the

1. NPV
2. opportunity cost
3. risk premium
4. rate of return

✅ Correct Answer: 4

An investment should be accepted if

1. Rate of Return > Opportunity Cost
2. Rate of Return < Opportunity Cost
3. Rate of Return = Opportunity Cost
4. A, B and C are irrelevant

✅ Correct Answer: 1

Governments and corporations issue bonds to

1. borrow money
2. lend money
3. both A and B
4. none of these

✅ Correct Answer: 1

Regular interest payment to the bond holders is called

1. principal
2. coupon
3. face value
4. yield

✅ Correct Answer: 2

At maturity the bond holders get back their principal. The principal is called

1. coupon
2. face value
3. yield
4. return

✅ Correct Answer: 2

Any economic resource that can produce economic value to the holder is called

1. asset
2. return
3. maturity
4. yield

✅ Correct Answer: 1

A collection of assets held by an investor is called

1. corporate bond
2. random returns
3. risk premium
4. portfolio

✅ Correct Answer: 4

The risk of a well-diversified portfolio depends on the __________ of the securities included in the portfolio.

1. specific risk
2. market risk
3. both A and B
4. none of these

✅ Correct Answer: 2

The contribution of an individual security to the risk of a well-diversified portfolio is measured by?

1. beta
2. variance
3. standard deviation
4. CAPM

✅ Correct Answer: 1

The sensitivity of an asset to the market movements is called

1. beta
2. variance
3. standard deviation
4. CAPM

✅ Correct Answer: 1

The average beta of all stocks in a market is

1. 1
2. 0
3. 1
4. 1.5

✅ Correct Answer: 3