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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-7

Each section contains 100 MCQs on Financial Management .
91
If book value is greater than market value comparison with investors for future stock are considered as
Discuss
Answer & Solution
Answer: Option A
Solution:
If book value is greater than market value comparison with investors for future stock are considered as pessimistic. Book value is also the net asset value of a company calculated as total assets minus intangible assets (patents, goodwill) and liabilities. For the initial outlay of an investment, book value may be net or gross of expenses such as trading costs, sales taxes, service charges and so on.
92
An average return of portfolio divided by its coefficient of beta is classified as
Discuss
Answer & Solution
Answer: Option B
Solution:
An average return of portfolio divided by its coefficient of beta is classified as treynor's reward to volatility ratio. The Treynor ratio, also known as the reward-to-volatility ratio, is a performance metric for determining how much excess return was generated for each unit of risk taken on by a portfolio.
93
Slope coefficient of beta is classified statistically significant if its probability is
Discuss
Answer & Solution
Answer: Option C
Solution:
Slope coefficient of beta is classified statistically significant if its probability is less than 5%. A standardized beta coefficient compares the strength of the effect of each individual independent variable to the dependent variable.
94
Second factor in Fama French three factor model is the
Discuss
Answer & Solution
Answer: Option C
Solution:
Second factor in Fama French three factor model is the size of company. The Fama and French model has three factors: size of firms, book-to-market values and excess return on the market. In other words, the three factors used are SMB (small minus big), HML (high minus low) and the portfolio's return less the risk free rate of return.
95
Difference between actual return on stock and predicted return is considered as
Discuss
Answer & Solution
Answer: Option D
Solution:
Difference between actual return on stock and predicted return is considered as random error. Random error causes one measurement to differ slightly from the next. It comes from unpredictable changes during an experiment.
96
Complex statistical and mathematical theory is an approach, which is classified as
Discuss
Answer & Solution
Answer: Option A
Solution:
Complex statistical and mathematical theory is an approach, which is classified as arbitrage pricing theory. Arbitrage pricing theory (APT) is a multi-factor asset pricing model based on the idea that an asset's returns can be predicted using the linear relationship between the asset’s expected return and a number of macroeconomic variables that capture systematic risk.
97
First step in determining an efficient portfolio is to consider
Discuss
Answer & Solution
Answer: Option A
Solution:
First step in determining an efficient portfolio is to consider set of attainable portfolios. The feasible, or attainable, set represents all portfolios that can be constructed from a given set of stocks. This set is only efficient for part of its combinations. An efficient portfolio is that portfolio which provides the highest expected return for any degree of risk.
98
Tendency of people to blame failure on bad luck but given tribute of success to themselves is classified as
Discuss
Answer & Solution
Answer: Option A
Solution:
Tendency of people to blame failure on bad luck but given tribute of success to themselves is classified as self-attribution bias. Self-attribution bias is a long-standing concept in psychology research and refers to individuals' tendency to attribute successes to personal skills and failures to factors beyond their control.
99
Stock portfolio with highest book to market ratios is considered as
Discuss
Answer & Solution
Answer: Option A
Solution:
Stock portfolio with highest book to market ratios is considered as H portfolio.
100
High portfolio return is 6.5% and low portfolio return is 3.0% then HML portfolio will be
Discuss
Answer & Solution
Answer: Option C
Solution:
HML Portfolio = High portfolio return - Low portfolio return
= 6.5% - 3.00% = 3.5%.