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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-2 section-8

Each section contains 100 MCQs on Financial Management .
11
In calculation of betas, an adjusted betas are highly dependent on historical
Discuss
Answer & Solution
Answer: Option A
Solution:
In calculation of betas, an adjusted betas are highly dependent on historical unadjusted betas. Betas calculated purely based on historical data are unadjusted betas. However, this beta estimate based on historical estimates is not a good indicator.
12
A curve which shows attitude towards risk just way reflected in return trade-off function is classified as
Discuss
Answer & Solution
Answer: Option B
Solution:
A curve which shows attitude towards risk just way reflected in return trade-off function is classified as indifference curve. An indifference curve is a graph that shows a combination of two goods that give a consumer equal satisfaction and utility, thereby making the consumer indifferent.
13
In capital market line, risk of efficient portfolio is measured by its
Discuss
Answer & Solution
Answer: Option A
Solution:
In capital market line, risk of efficient portfolio is measured by its 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.
14
Formula written as 0.67(Historical Beta) + 0.35(1.0) is used to calculate
Discuss
Answer & Solution
Answer: Option B
Solution:
Formula written as 0.67(Historical Beta) + 0.35(1.0) is used to calculate adjusted betas. The Adjusted Beta is an estimate of a security's future Beta. Adjusted Beta is initially derived from historical data, but modified by the assumption that a security's true Beta will move towards the market average, of 1, over time.
15
A model which regresses return of stock against return of market is classified as
Discuss
Answer & Solution
Answer: Option B
Solution:
A model which regresses return of stock against return of market is classified as market mode.
16
According to capital asset pricing model assumptions, quantities of all assets are
Discuss
Answer & Solution
Answer: Option A
Solution:
According to capital asset pricing model assumptions, quantities of all assets are given and fixed. The Capital Asset Pricing Model (CAPM) measures the risk of a security in relation to the portfolio. It considers the required rate of return of a security in the light of its contribution to total portfolio risk.
17
According to Fama French Three-Factor model, market value of company equity is used to calculate
Discuss
Answer & Solution
Answer: Option D
Solution:
According to Fama French Three-Factor model, market value of company equity is used to calculate 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.
18
Negative minimum risk portfolio of any security shows that market security sold
Discuss
Answer & Solution
Answer: Option A
Solution:
Negative minimum risk portfolio of any security shows that market security sold less than original price. Assets that have a negative correlation with each other produce negative portfolio variance. Variance is one measure of the volatility of an asset. An asset with higher variance also carries greater risk.
19
In capital asset pricing model, covariance between stock and market is divided by variance of market returns is used to calculate
Discuss
Answer & Solution
Answer: Option C
Solution:
In capital asset pricing model, covariance between stock and market is divided by variance of market returns is used to calculate beta coefficient of company. beta of a company measures how the company's equity market value changes with changes in the overall market. It is used in the Capital Asset Pricing Model (CAPM) to estimate the return of an asset.
20
Stocks which has high book for market ratio are considered as
Discuss
Answer & Solution
Answer: Option A
Solution:
Stocks which has high book for market ratio are considered as more risky.