Financial Management MCQs

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Long period of bond maturity leads to






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If coupon rate is equal to going rate of interest then bond will be sold






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Falling interest rate leads change to bondholder income which is






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Bonds issued by corporations and exposed to default risk are classified as






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Treasury bonds are exposed to additional risks that are included






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Reinvestment risk of bonds is higher on






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Bond which is offered below its face value is classified as






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Risk of fall in income due to fall in interest rates in future is classified as






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Bonds that have high liquidity premium are usually have






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Redemption option which protects investors against rise in interest rate is considered as






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Payment divided by par value is classified as






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An annual interest payment divided by current price of bond is considered as






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If coupon rate is more than going rate of interest then bond will be sold






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Coupon rate of convertible bond is






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Rate denoted as r* is best classified as






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An outstanding bonds are also classified as






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Unsecured bonds which is designated for only notes payable or all other debts are classified as






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Bond which is issued in market and few days are passed of its issuance is classified as






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Real risk-free rate is applicable when it is expected that there will be






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According to top rating agencies S&P double-B and other lower grade bonds are classified as






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Price of an outstanding bond increases when market rate






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An average inflation rate which is expected over life of security is classified as






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Type of bond which pays interest payment only when it earns is classified as






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Type of bonds that pays no coupon payment but provides little appreciation are classified as






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In call provision, it is stated that company will pay to issue an amount






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If coupon rate is less than going rate of interest then bond will be sold






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Bonds issued by small companies tend to have






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An interest yield = 7.9% and capital gains yield = 2.5% then total rate of return is






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Stated value of bonds or face value is considered as






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Type of bond in which payments are made on basis of inflation index is classified as






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An bond whose price will rise above its face value is classified as






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Coupon rate of bond is also called






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Real risk-free interest rate in addition with an inflation premium is equal to






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An increasing in interest rate leads to decline in value of






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Bonds issued by government and backed by Pak government are classified as






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Price of an outstanding bond decreases when market rate is






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As free bonds issue for welfare by industrial agencies or pollution control agencies are classified as






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Value generally promises to pay at maturity date and a firm borrows is considered as bond






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Maturity date decides at time of issuance of bond and legally permissible is classified as






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Bonds with deferred call have protection which is classified as






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Bonds issued by local and state governments with default risk are






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Bonds having zero default risk are classified as






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Right held with corporations to call issued bonds for redemption is considered as






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Bond that has been issued in very recent timing is classified as






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Type of options that permit bond holder to buy stocks at stated price are classified as






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When price of bond is calculated below its par value, it is classified as






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An interest rate which is used in calculation of cash flows of bonds is called






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According to top rating agencies S&P triple-A and double-A rating bonds are classified as an






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Rate on debt that increases as soon market rises is classified as






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If market interest rate rises above coupon rate then bond will be sold






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Bonds that can be converted into shares of common stock are classified as






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Type of bonds that are issued by foreign governments or foreign corporations are classified as






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If default probability is zero and bond is not called then yield to maturity is






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Rate of return (in percentages) consists of






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If market interest rate falls below coupon rate then bond will be sold






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Yield of interest rate which is below than coupon rate, this yield is classified as






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Market in which bonds are traded over-the-counter than in an organized exchange is classified as






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Coupon payment is calculated with help of interest rate, then this rate considers as






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An effect of interest rate risk and investment risk on a bond yield is classified as






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Coupon payment of bond which is fixed at time of issuance






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Required increasing in current assets and an increasing in current liabilities is subtracted to calculate






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Cash flows that could be generated from an owned asset by company but not use in project are classified as






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In capital budgeting, cost of capital is used as discount rate and is based on predetermines






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Situation in which company replaces existing assets with new assets is classified as






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Relevant cash flow which company expects when its will implement project is classified as






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Free cash flow is $12000, an operating cash flow is $4000, an investment outlay cash flow is $5000 then salvage cash flow would be






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Cash flows that should be considered for decision in hand are classified as






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Nominal interest rates and nominal cash flows are usually reflected the






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In cash flow estimation and risk analysis, real rate will be equal to nominal rate if there is






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Weighted average cost of debt, preferred stock and common equity is classified as






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An investment outlay cash flow is $4000, operating cash flow is $1000 and salvage cash flow is $5000 then free cash flow would be






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Rate of return which is required to satisfy stockholders and debt holders is classified as






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Net investment in operating capital is $7000 and net operating profit after taxes is $11,000 then free cash flow will be






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Free cash flow is $17000 and net investment in operating capital is $10000 then net operating profit after taxes would be






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In cash flow estimation, depreciation is considered as






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Net operating profit after taxes is $4500, net investment in operating capital is $8500 and then free cash flow would be






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Net investment in operating capital is subtracted from net operating profit after taxes to calculate






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Project which is started by firm for increasing sales is classified as






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Real interest rate and real cash flows do not include






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Gross fixed asset expenditures is $6000 and free cash flow is $8000 then operating cash flows will be






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Real rate expected cash flows and nominal rate expected cash flows must be






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Double declining balance method and sum of years digits are included in






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Free cash flow is $15000, operating cash flow is $3000, investment outlay cash flow is $5000 then salvage cash flow will be






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An operating cash flows is $12000 and gross fixed asset expenditure is $5000 then free cash flow will be






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Cost which has occurred already and not affected by decisions is classified as






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An analysis and estimation of cash flows include






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During planning period, a marginal cost for raising a new debt is classified as






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Cost of common stock is 14% and bond risk premium is 9% then bond yield will be






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In weighted average cost of capital, a company can affect its capital cost through






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A risk associated with project and way considered by well diversified stockholder is classified as






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Cost of common stock is 13% and bond risk premium is 5% then bond yield would be






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Variability for expected returns for projects is classified as






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Cost of common stock is 16% and bond yield is 9% then bond risk premium would be






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if future return on common stock is 14% and rate on T-bonds is 5% then current market risk premium will be






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Cost of capital is equal to required return rate on equity in case if investors are only






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Interest rate is 12% and tax savings (1-0.40) then after-tax component cost of debt will be






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Retention ratio is 0.60 and return on equity is 15.5% then growth retention model would be






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Method uses for an estimation of cost of equity is classified as






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Bond risk premium is added in to bond yield to calculate






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A type of beta which incorporates about company such as changes in capital structure is classified as