ExamVeda
Login
Home

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-4 section-7

Each section contains 100 MCQs on Financial Management .
31
In binomial approach of option pricing model, fourth step is to create
Discuss
Answer & Solution
Answer: Option C
Solution:
In binomial approach of option pricing model, fourth step is to create riskless investment. An investment with a certain rate of return and no chance of default.
32
Current value of portfolio is Rs 550 and to cover an obligation of call option is Rs 200 then value of stock would be
Discuss
Answer & Solution
Answer: Option C
Solution:
Value of Stock = Current value of portfolio + Call option obligation
= Rs. 550 + Rs. 200 = Rs. 750.
33
According to Black Scholes model, purchaser can borrow fraction of security at risk free interest rate which is
Discuss
Answer & Solution
Answer: Option A
Solution:
According to Black Scholes model, purchaser can borrow fraction of security at risk free interest rate which is short term. Black-Scholes is a pricing model used to determine the fair price or theoretical value for a call or a put option based on six variables such as volatility, type of option, underlying stock price, time, strike price, and risk-free rate.
34
Type of option which cannot be exercised before an expiry date which is classified as
Discuss
Answer & Solution
Answer: Option A
Solution:
Type of option which cannot be exercised before an expiry date which is classified as European option. A European option is a type of put or call option that can be exercised only on its expiration date.
35
Input call parity relationship, put option minus call option in addition with stock is equal to
Discuss
Answer & Solution
Answer: Option A
Solution:
Input call parity relationship, put option minus call option in addition with stock is equal to exercise price present value. The exercise price is the price at which an underlying security can be purchased or sold when trading a call or put option, respectively.
36
Current option is Rs 800 and current value of stock in portfolio is Rs 1900 then present value of portfolio would be
Discuss
Answer & Solution
Answer: Option C
Solution:
Current value of portfolio = Value of stock - Call option
= Rs. 1900 - Rs. 800 = Rs. 1100.
37
Second step in binomial approach of option pricing is to define range of values
Discuss
Answer & Solution
Answer: Option A
Solution:
Second step in binomial approach of option pricing is to define range of values at expiration. 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.
38
An increase in value of option leads to low present value of exercise cost only if it has
Discuss
Answer & Solution
Answer: Option B
Solution:
An increase in value of option leads to low present value of exercise cost only if it has interest rates are high. Because higher interest rates mean higher borrowing costs, people will eventually start spending less. The demand for goods and services will then drop, which will cause inflation to fall.
39
Third step in binomial approach of option pricing is to
Discuss
Answer & Solution
Answer: Option B
Solution:
Third step in binomial approach of option pricing is to equalize range of payoffs.
40
A type of contract in which contract holder has right to sell an asset at specific period for predetermining price is classified as
Discuss
Answer & Solution
Answer: Option A
Solution:
A type of contract in which contract holder has right to sell an asset at specific period for predetermining price is classified as option. Options are financial instruments that are derivatives or based on underlying securities such as stocks. An options contract offers the buyer the opportunity to buy or sell depending on the type of contract they hold the underlying asset.