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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-7 section-7

Each section contains 100 MCQs on Financial Management .
61
According to Black Scholes model, rate which is constant and known is classified as
Discuss
Answer & Solution
Answer: Option C
Solution:
According to Black Scholes model, rate which is constant and known is classified as risk free interest rate. The risk-free interest rate is the rate of return of a hypothetical investment with no risk of financial loss, over a given period of time.
62
According to Black Scholes model, trading of securities and stock prices moves respectively
Discuss
Answer & Solution
Answer: Option D
Solution:
According to Black Scholes model, trading of securities and stock prices moves continuously and randomly respectively.
63
In binomial approach of option pricing model, last step for finding an option is
Discuss
Answer & Solution
Answer: Option D
Solution:
In binomial approach of option pricing model, last step for finding an option is call price. The call price is the price a bond issuer or preferred stock issuer must pay investors if it wants to buy back, or call, all or part of an issue before the maturity date.
64
Type of options that do not have stock in portfolio to back up options is classified as
Discuss
Answer & Solution
Answer: Option C
Solution:
Type of options that do not have stock in portfolio to back up options is classified as naked options. Naked option refers to an option contract which does not comprise ownership of the underlying security by the purchasing or selling party.
65
Market value of option which is out-of-money is
Discuss
Answer & Solution
Answer: Option A
Solution:
Market value of option which is out-of-money is greater than zero. The market price of the option is the price you pay when you buy the option and the price you get when you sell the option. The market price of the option consists of two parts, intrinsic value and time value.
66
Present value of portfolio is Rs 900 and current value of stock in portfolio is Rs 1500 then current option price would be
Discuss
Answer & Solution
Answer: Option D
Solution:
Current option price = Current value of stock - Present value of portfolio
= Rs. 1500 - Rs. 900 = Rs. 600.
67
Stock option is considered more valuable in situation when stock have
Discuss
Answer & Solution
Answer: Option D
Solution:
Stock option is considered more valuable in situation when stock have highly volatile. 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.
68
Pricing model approach in which it is assumed that stock price can have one of two values of stock is classified as
Discuss
Answer & Solution
Answer: Option D
Solution:
Pricing model approach in which it is assumed that stock price can have one of two values of stock is classified as binomial approach. The binomial option pricing model is an options valuation method developed in 1979. The binomial option pricing model uses an iterative procedure, allowing for the specification of nodes, or points in time, during the time span between the valuation date and the option's expiration date.
69
An option which can be exercised any desired time before an expiry date is classified as
Discuss
Answer & Solution
Answer: Option D
Solution:
An option which can be exercised any desired time before an expiry date is classified as American option. An American option is a put option or call option that can be exercised at any time on or before its expiration date.
70
In financial planning, a higher strike price leads to call option
Discuss
Answer & Solution
Answer: Option C
Solution:
In financial planning, a higher strike price leads to call option price is lower. Financial Planning is the process of estimating the capital required and determining it's competition. It is the process of framing financial policies in relation to procurement, investment and administration of funds of an enterprise.