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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-6 section-7

Each section contains 100 MCQs on Financial Management .
51
In an option pricing, a rises in risk free rate results in option's value
Discuss
Answer & Solution
Answer: Option B
Solution:
In an option pricing, a rises in risk free rate results in option's value slightly increases. Option pricing is the amount per share at which an option is traded. Although the option holder is not obligated to exercise the option, the seller must buy or sell the underlying instrument if the option is exercised.
52
If current price increases from lower to higher then an
Discuss
Answer & Solution
Answer: Option B
Solution:
If current price increases from lower to higher then an option value will increase. The current price, also known as the market value, is the price at which goods are currently being sold in the market.
53
In financial planning, formula MAX [current price of stock-strike price, 0] is used to calculate
Discuss
Answer & Solution
Answer: Option B
Solution:
In financial planning, formula MAX [current price of stock-strike price, 0] is used to calculate exercise value. The exercise value is the value that an option buyer will get from the option on exercising it.
54
According to put call parity relationship, call option plus present value of exercise price minus stock is to calculate
Discuss
Answer & Solution
Answer: Option C
Solution:
According to put call parity relationship, call option plus present value of exercise price minus stock is to calculate 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.
55
When two portfolios have identical values and payoffs then it is classified as
Discuss
Answer & Solution
Answer: Option D
Solution:
When two portfolios have identical values and payoffs then it is classified as put call parity relationship. 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.
56
Greater value of option, larger span of time value is usually results in
Discuss
Answer & Solution
Answer: Option B
Solution:
Greater value of option, larger span of time value is usually results in longer call option. A call option, often simply labeled a "call", is a financial contract between two parties, the buyer and the seller of this type of option.
57
Price at which European and American options can be exercised is classified as
Discuss
Answer & Solution
Answer: Option D
Solution:
Price at which European and American options can be exercised is classified as exercise price and strike price.
58
Current option price is added to present value of portfolio for calculating
Discuss
Answer & Solution
Answer: Option B
Solution:
Current option price is added to present value of portfolio for calculating current value of stock.
59
In options pricing, an exercise price rises from lower to higher which leads to
Discuss
Answer & Solution
Answer: Option C
Solution:
In options pricing, an exercise price rises from lower to higher which leads to option value decreases. Before venturing into the world of trading options, investors should have a good understanding of the factors determining the value of an option. These include the current stock price, the intrinsic value, time to expiration or the time value, volatility, interest rates, and cash dividends paid.
60
In stock option, a little chance exists for large gain on stock when price of stock
Discuss
Answer & Solution
Answer: Option C
Solution:
In stock option, a little chance exists for large gain on stock when price of stock rarely moves. A stock option gives an investor the right, but not the obligation, to buy or sell a stock at an agreed upon price and date.