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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-8

Each section contains 100 MCQs on Financial Management .
91
Greater chance of lower actual return than expected return and greater variation is indicated by
Discuss
Answer & Solution
Answer: Option B
Solution:
Greater chance of lower actual return than expected return and greater variation is indicated by larger standard deviation. The standard deviation is a statistic that measures the dispersion of a dataset relative to its mean and is calculated as the square root of the variance. The greater the standard deviation of securities, the greater the variance between each price and the mean, which shows a larger price range.
92
Tendency of measuring correlation of two variables is classified as
Discuss
Answer & Solution
Answer: Option C
Solution:
Tendency of measuring correlation of two variables is classified as correlation coefficient. The correlation coefficient is a statistical measure that calculates the strength of the relationship between the relative movements of two variables.
93
Size of firm and market or book ratio are variables which are related to
Discuss
Answer & Solution
Answer: Option D
Solution:
Size of firm and market or book ratio are variables which are related to stock returns. Stock Market Returns are the returns that the investors generate out of the stock market. This return could be in the form of profit through trading or in the form of dividends given by the company to its shareholders from time-to-time.
94
A model in which behavior of asset returns is measured for set of risk factors and market risk is classified as
Discuss
Answer & Solution
Answer: Option C
Solution:
A model in which behavior of asset returns is measured for set of risk factors and market risk is classified as multifactor model. A multi-factor model is a financial model that employs multiple factors in its calculations to explain market phenomena and/or equilibrium asset prices.
95
Relationship between risk and required return is classified as
Discuss
Answer & Solution
Answer: Option A
Solution:
Relationship between risk and required return is classified as security market line. The security market line (SML) is a line drawn on a chart that serves as a graphical representation of the capital asset pricing model (CAPM), which shows different levels of systematic, or market, risk of various marketable securities plotted against the expected return of the entire market at a given point in time.
96
Tendency of moving together of two variables is classified as
Discuss
Answer & Solution
Answer: Option A
Solution:
Tendency of moving together of two variables is classified as correlation. Correlation, in the finance and investment industries, is a statistic that measures the degree to which two securities move in relation to each other.
97
Of all stocks in a portfolio, required rate of return is classified as
Discuss
Answer & Solution
Answer: Option D
Solution:
Of all stocks in a portfolio, required rate of return is classified as market portfolio. A market portfolio is a theoretical bundle of investments that includes every type of asset available in the world financial market, with each asset weighted in proportion to its total presence in the market.
98
Risk in average individual stock can be reduced by placing an individual stock in
Discuss
Answer & Solution
Answer: Option B
Solution:
Risk in average individual stock can be reduced by placing an individual stock in diversified portfolio. A diversified investment is a portfolio of various assets that earns the highest return for the least risk. A typical diversified portfolio has a mixture of stocks, fixed income, and commodities.
99
Required return is 15% and premium for risk is 11% then risk free return would be
Discuss
Answer & Solution
Answer: Option B
Solution:
Risk free return = Required return - Premium for risk
= 15% - 11% = 4%.
100
Market required return is subtracted from risk free rate which is used to calculate
Discuss
Answer & Solution
Answer: Option B
Solution:
Market required return is subtracted from risk free rate which is used to calculate market risk premium. The market risk premium is the difference between the expected return on a market portfolio and the risk-free rate. The market risk premium is equal to the slope of the security market line (SML), a graphical representation of the capital asset pricing model (CAPM).