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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-5 section-6

Each section contains 100 MCQs on Financial Management .
41
Reinvestment risk of bonds is higher on
Discuss
Answer & Solution
Answer: Option A
Solution:
Reinvestment risk of bonds is higher on short maturity bonds. Short-term bond funds are mutual funds that invest in bonds with a maturity period less than 5 years.
42
Bonds that have high liquidity premium are usually have
Discuss
Answer & Solution
Answer: Option C
Solution:
Bonds that have high liquidity premium are usually have less frequently traded. A bond is a fixed income instrument that represents a loan made by an investor to a borrower (typically corporate or governmental). A bond could be thought of as an I.O.U. between the lender and borrower that includes the details of the loan and its payments.
43
Bond which is offered below its face value is classified as
Discuss
Answer & Solution
Answer: Option B
Solution:
Bond which is offered below its face value is classified as original issue discount bond. Bonds that trade at a value of less than face value would be considered a discount bond.
44
Risk of fall in income due to fall in interest rates in future is classified as
Discuss
Answer & Solution
Answer: Option C
Solution:
Risk of fall in income due to fall in interest rates in future is classified as reinvestment risk. Reinvestment risk is the probability that an investor will be unable to reinvest cash flows (e.g., coupon payments) at a rate comparable to the current investment's rate of return.
45
Redemption option which protects investors against rise in interest rate is considered as
Discuss
Answer & Solution
Answer: Option B
Solution:
Redemption option which protects investors against rise in interest rate is considered as redeemable at par. Redemption Option means the option that each holder of Parent Common Stock has to require the Parent to redeem or convert his, her or its ownership of Parent Common Stock prior to the Closing in accordance with the governing documents of Parent.
46
Payment divided by par value is classified as
Discuss
Answer & Solution
Answer: Option B
Solution:
Payment divided by par value is classified as coupon payment. A coupon payment on a bond is the annual interest payment that the bondholder receives from the bond's issue date until it matures.
47
An official entity that represents bondholders and ensures stated rules in indenture is classified as
Discuss
Answer & Solution
Answer: Option A
Solution:
An official entity that represents bondholders and ensures stated rules in indenture is classified as trustee. A trustee is a person or firm that holds and administers property or assets for the benefit of a third party. A trustee may be appointed for a wide variety of purposes, such as in the case of bankruptcy, for a charity, for a trust fund, or for certain types of retirement plans or pensions.
48
An annual interest payment divided by current price of bond is considered as
Discuss
Answer & Solution
Answer: Option A
Solution:
An annual interest payment divided by current price of bond is considered as current yield. Current yield is an investment's annual income (interest or dividends) divided by the current price of the security. This measure examines the current price of a bond, rather than looking at its face value.
49
If coupon rate is more than current rate of interest then bond will be sold
Discuss
Answer & Solution
Answer: Option A
Solution:
A bond's interest rate is related to the current prevailing interest rates and the perceived risk of the issuer. When interest rates are less than the coupon rate, the bond can be sold at a premium (higher than the face value). When current interest rates are greater than a bond's coupon rate, the bond will sell below its face value at a discount.
50
Call provision practiced by company which states that call price will be paid is classified as
Discuss
Answer & Solution
Answer: Option C
Solution:
Call provision practiced by company which states that call price will be paid is classified as make-whole call provision. A make whole call (provision) is a type of call provision on a bond allowing the borrower to pay off remaining debt early.