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Financial Management MCQ Questions and Solutions with Explanations | Commerce

Financial Management MCQ Questions and answers with easy and logical explanations. Commerce provides you all type of quantitative and competitive aptitude mcq questions with easy and logical explanations. Financial Management MCQ is important for exams like B.COM, M.COM, BBA, BBM, CA, CS, CMA, CPA, CFA, UPSC, NET, Banking and other commerce department exam. Page-10 section-6

Each section contains 100 MCQs on Financial Management .
91
Bonds issued by local and state governments with default risk are
Discuss
Answer & Solution
Answer: Option A
Solution:
Bonds issued by local and state governments with default risk are municipal bonds. Municipal bonds are loans investors make to local governments.
92
Indexed bonds that are issued by linking payments to inflation are classified as
Discuss
Answer & Solution
Answer: Option A
Solution:
Indexed bonds that are issued by linking payments to inflation are classified as treasury inflation protected securities. Treasury Inflation-Protected Securities (TIPS) are a form of U.S. Treasury bond designed to help investors protect against inflation. These bonds are indexed to inflation, have U.S. government backing, and pay investors a fixed interest rate as the bond's par value adjusts with the inflation rate.
93
Bonds having zero default risk are classified as
Discuss
Answer & Solution
Answer: Option D
Solution:
Bonds having zero default risk are classified as treasury bonds.
94
Right held with corporations to call issued bonds for redemption is considered as
Discuss
Answer & Solution
Answer: Option B
Solution:
Right held with corporations to call issued bonds for redemption is considered as call provision. A call provision is a provision on a bond or other fixed-income instrument that allows the issuer to repurchase and retire its bonds.
95
Bond that has been issued in very recent timing is classified as
Discuss
Answer & Solution
Answer: Option C
Solution:
Bond that has been issued in very recent timing is classified as new issue. A new issue is a reference to a security that has been registered, issued, and is being sold on a market to the public for the first time. The term does not necessarily refer to newly issued stocks, although initial public offerings (IPOs) are the most commonly known new issues.
96
Type of options that permit bond holder to buy stocks at stated price are classified as
Discuss
Answer & Solution
Answer: Option C
Solution:
Type of options that permit bond holder to buy stocks at stated price are classified as warrants. Warrants are a derivative that give the right, but not the obligation, to buy or sell a security most commonly an equity at a certain price before expiration. The price at which the underlying security can be bought or sold is referred to as the exercise price or strike price.
97
When price of bond is calculated below its par value, it is classified as
Discuss
Answer & Solution
Answer: Option B
Solution:
When price of bond is calculated below its par value, it is classified as discount bond. A discount bond is a bond that is issued for less than its par or face value. Discount bonds may also be a bond currently trading for less than its face value in the secondary market. A bond is considered a deep-discount bond if it is sold at a significantly lower price than par value, usually at 20% or more.
98
Required rate of return in calculating bond's cash flow is also classified as
Discuss
Answer & Solution
Answer: Option D
Solution:
Required rate of return in calculating bond's cash flow is also classified as going rate of return and yield.
99
An interest rate which is used in calculation of cash flows of bonds is called
Discuss
Answer & Solution
Answer: Option C
Solution:
An interest rate which is used in calculation of cash flows of bonds is called required rate of return. The required rate of return is the minimum return an investor expects to achieve by investing in a project. An investor typically sets the required rate of return by adding a risk premium to the interest percentage that could be gained by investing excess funds in a risk-free investment.
100
According to top rating agencies S&P triple-A and double-A rating bonds are classified as an
Discuss
Answer & Solution
Answer: Option B
Solution:
According to top rating agencies S&P triple-A and double-A rating bonds are classified as an extremely safe.