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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-3 section-7

Each section contains 100 MCQs on Financial Management .
21
Types of option markets do not include
Discuss
Answer & Solution
Answer: Option C
Solution:
Types of option markets do not include expiry option. The expiration date of an option contract is the last date on which the holder of the option may exercise it according to its terms. In the case of options with "automatic exercise" the net value of the option is credited to the long and debited to the short position holders.
22
In binomial approach of option pricing model, value of stock is subtracted from call option obligation value to calculate
Discuss
Answer & Solution
Answer: Option A
Solution:
In binomial approach of option pricing model, value of stock is subtracted from call option obligation value to calculate current value of portfolio. It is referred to as mark-to-market and involves multiplying the current share price of the stock by the number of shares owned and summing these values for a total portfolio value.
23
According to exercise value and option price, market value of option will be zero when
Discuss
Answer & Solution
Answer: Option C
Solution:
According to exercise value and option price, market value of option will be zero when stock price is zero. The strike price is defined as the price at which the holder of an options can buy (in the case of a call option) or sell (in the case of a put option) the underlying security when the option is exercised. Hence, strike price is also known as exercise price.
24
An excess of actual price of option over an exercise value of option is classified as
Discuss
Answer & Solution
Answer: Option A
Solution:
An excess of actual price of option over an exercise value of option is classified as time value options. In options trading, time value refers to the portion of an option's premium that is attributable to the amount of time remaining until the expiration of the option contract.
25
At last day when European and American option can be exercised is classified as
Discuss
Answer & Solution
Answer: Option C
Solution:
At last day when European and American option can be exercised is classified as expiration date. An expiration date in derivatives is the last day that a derivative, such as options or futures, is valid. On or before this day, investors will have already decided what to do with their expiring position.
26
Current value of stock in portfolio with current option price Rs 20 is Rs 50, then present value of portfolio would be
Discuss
Answer & Solution
Answer: Option A
Solution:
Present value of portfolio = Current value of portfolio - Current option price
= Rs. 50 - Rs. 20 = Rs. 30.
27
Situation in financial options in which strike price is less than current price of stock is classified as
Discuss
Answer & Solution
Answer: Option A
Solution:
Situation in financial options in which strike price is less than current price of stock is classified as in-the-money. A call option is in the money (ITM) if the market price is above the strike price. A put option is in the money if the market price is below the strike price.
28
Input call parity relationship, present value of exercise price is added to call option which is equal to
Discuss
Answer & Solution
Answer: Option A
Solution:
Input call parity relationship, present value of exercise price is added to call option which is equal to put option stock. A put or put option is a stock market device which gives the owner the right, but not the obligation, to sell an asset (the underlying), at a specified price (the strike), by a predetermined date (the expiry or maturity) to a given party (the seller of the put).
29
An option that gives investors right to sell a stock at predefined price is classified as
Discuss
Answer & Solution
Answer: Option A
Solution:
An option that gives investors right to sell a stock at predefined price is classified as put option. A put option is an option contract giving the owner the right, but not the obligation, to sell a specified amount of an underlying security at a specified price within a specified time frame.
30
Value of stock is Rs 250 and call option obligation is Rs 100 then current value of portfolio would be
Discuss
Answer & Solution
Answer: Option B
Solution:
Current value of portfolio = Value of stock - Call option
= Rs. 250 - Rs. 100 = Rs. 150.