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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-4 section-8

Each section contains 100 MCQs on Financial Management .
31
A theory which states that assets are traded at price equal to its intrinsic value is classified as
Discuss
Answer & Solution
Answer: Option B
Solution:
A theory which states that assets are traded at price equal to its intrinsic value is classified as efficient market hypothesis. The Efficient Markets Hypothesis is an investment theory primarily derived from concepts attributed to Eugene Fama's research work as detailed in his 1970.
32
In capital asset pricing model, characteristic line is classified as
Discuss
Answer & Solution
Answer: Option A
Solution:
In capital asset pricing model, characteristic line is classified as regression line. The Regression Line is the line that best fits the data, such that the overall distance from the line to the points (variable values) plotted on a graph is the smallest.
33
All assets are perfectly divisible and liquid in
Discuss
Answer & Solution
Answer: Option C
Solution:
All assets are perfectly divisible and liquid in capital asset pricing model. The Capital Asset Pricing Model (CAPM) describes the relationship between systematic risk and expected return for assets, particularly stocks. CAPM is widely used throughout finance for pricing risky securities and generating expected returns for assets given the risk of those assets and cost of capital.
34
Relationship between risk free asset and a single risky asset are always
Discuss
Answer & Solution
Answer: Option A
Solution:
Relationship between risk free asset and a single risky asset are always linear. The covariance of the risk-free asset with any risky asset or portfolio will always equal zero. Similarly the correlation between any risky asset and the risk-free asset would be zero. Combining a Risk-Free Asset with a Risky Portfolio Expected return: the weighted average of the two returns is a linear relationship.
35
Gross domestic product, world economy strength and level of inflation are factors which is used to determine
Discuss
Answer & Solution
Answer: Option A
Solution:
Gross domestic product, world economy strength and level of inflation are factors which is used to determine market realized return. Realized yield is the actual return earned during the holding period for an investment, and may include dividends, interest payments, and other cash distributions.
36
Rational traders immediately sell stock when price is
Discuss
Answer & Solution
Answer: Option D
Solution:
Rational traders immediately sell stock when price is too high.
37
Stock issued by company have lower rate of return because of
Discuss
Answer & Solution
Answer: Option B
Solution:
Stock issued by company have lower rate of return because of low book to market ratio. The book-to-market ratio is used to find a company's value by comparing its book value to its market value.
38
Riskless rate in addition with risk premium is multiplied by standard deviation of portfolio for using to calculate expected return rate on
Discuss
Answer & Solution
Answer: Option A
Solution:
Riskless rate in addition with risk premium is multiplied by standard deviation of portfolio for using to calculate expected return rate on efficient portfolio.
39
Realized and required return for individual stocks are classified as function of fundamental
Discuss
Answer & Solution
Answer: Option B
Solution:
Realized and required return for individual stocks are classified as function of fundamental economic factors. Realized yield is the actual return earned during the holding period for an investment, and may include dividends, interest payments and other cash distributions.
40
First factor in Fama French three factor model is
Discuss
Answer & Solution
Answer: Option A
Solution:
First factor in Fama French three factor model is CAPM stock beta. The Capital Asset Pricing Model (CAPM) describes the relationship between systematic risk and expected return for assets, particularly stocks.