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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-7

Each section contains 100 MCQs on Financial Management .
41
According to Black Scholes model, short term seller receives today price which
Discuss
Answer & Solution
Answer: Option C
Solution:
According to Black Scholes model, short term seller receives today price which full cash proceeds. Proceeds are the cash received from the sale of goods or services and can be discussed as gross or net.
42
An investor who writes stock call options in his own portfolio is classified as
Discuss
Answer & Solution
Answer: Option B
Solution:
An investor who writes stock call options in his own portfolio is classified as covered option. A covered call option occurs when the investor owns the underlying asset and writes a call so that the underlying is on hand to sell to the option holder if the option is exercised. A covered put option occurs when the investor writes a put and has enough cash to cover the strike if the put is exercised.
43
According to put call parity relationship, a call option minus put option in addition with present value of exercise is equal to
Discuss
Answer & Solution
Answer: Option D
Solution:
According to put call parity relationship, a call option minus put option in addition with present value of exercise is equal to stock. Put-call parity is a principle that defines the relationship between the price of European put options and European call options of the same class, that is, with the same underlying asset, strike price, and expiration date.
44
Current value of stock included in portfolio is subtracted from current option price to calculate
Discuss
Answer & Solution
Answer: Option B
Solution:
Current value of stock included in portfolio is subtracted from current option price to calculate present value of portfolio. Present value (PV) is the current value of a future sum of money or stream of cash flows given a specified rate of return. Future cash flows are discounted at the discount rate, and the higher the discount rate, the lower the present value of the future cash flows.
45
In financial planning, most high option price will lead to
Discuss
Answer & Solution
Answer: Option A
Solution:
In financial planning, most high option price will lead to longer option period. option period is a time frame or period of time, which is valid for an option to be exercised before or on the expiration date. On the expiration date, the investor no longer has a choice but has to exercise the option.
46
Current option is Rs 700 and current value of stock in portfolio is Rs 1400 then present value of portfolio will be
Discuss
Answer & Solution
Answer: Option C
Solution:
Present value of portfolio = Current value of stock - Current option
= Rs. 1400 - Rs. 700 = Rs. 700.
47
Present value of portfolio is Rs 500 and current option price is Rs 1200 then value of stock included in portfolio will be
Discuss
Answer & Solution
Answer: Option A
Solution:
Value of stock included in portfolio = Current option price + Present value of portfolio
= Rs. 1200 + Rs. 500 = Rs. 1700.
48
Present value of portfolio is Rs 1300 and current value of stock in portfolio is Rs 2300 then current option price will be
Discuss
Answer & Solution
Answer: Option B
Solution:
Current option price = Current value of stock - Present value of portfolio
= Rs. 2300 - Rs. 1300 = Rs. 1000.
49
An investor who buys shares and writes a call option on stock is classified as
Discuss
Answer & Solution
Answer: Option C
Solution:
An investor who buys shares and writes a call option on stock is classified as hedger. A commercial hedger is an organization which uses futures contracts to lock in the price of specific commodities it uses in running its business.
50
Value of stock is Rs 1000 and current value of portfolio is Rs 1500 then obligation to cover call option will be
Discuss
Answer & Solution
Answer: Option D
Solution:
Obligation to cover call = Current value of portfolio - Value of stock
= Rs. 1500 - Rs. 1000 = Re. 500.