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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-8 section-6

Each section contains 100 MCQs on Financial Management .
71
If coupon rate is less than going rate of interest then bond will be sold
Discuss
Answer & Solution
Answer: Option B
Solution:
If coupon rate is less than going rate of interest then bond will be sold more than its par value. Most bonds have fixed coupon rates, meaning that no matter what the national interest rate may be and regardless of marker fluctuation the annual coupon payments remain static.
72
Type of provision which allows an orderly retirement of an issued bond which is classified as
Discuss
Answer & Solution
Answer: Option D
Solution:
Type of provision which allows an orderly retirement of an issued bond which is classified as sinking fund provision. A sinking fund is a fund established by an economic entity by setting aside revenue over a period of time to fund a future capital expense, or repayment of a long-term debt.
73
Bonds issued by small companies tend to have
Discuss
Answer & Solution
Answer: Option A
Solution:
Bonds issued by small companies tend to have high liquidity premium. Liquidity premium is a premium demanded by investors when any given security cannot be easily converted into cash for its fair market value. When the liquidity premium is high, the asset is said to be illiquid, and investors demand additional compensation for the added risk of investing their assets over a more extended period since valuations can fluctuate with market effects.
74
An interest yield = 7.9% and capital gains yield = 2.5% then total rate of return is
Discuss
Answer & Solution
Answer: Option A
No explanation is given for this question. Let's Discuss on Board
75
Stated value of bonds or face value is considered as
Discuss
Answer & Solution
Answer: Option B
Solution:
Stated value of bonds or face value is considered as par value. Par value is the face value of a bond, or for a share, the stock value stated in the corporate charter.
76
Type of bond in which payments are made on basis of inflation index is classified as
Discuss
Answer & Solution
Answer: Option B
Solution:
Type of bond in which payments are made on basis of inflation index is classified as purchasing power bond. Purchasing power is the value of a currency expressed in terms of the amount of goods or services that one unit of money can buy. Purchasing power is important because, all else being equal, inflation decreases the amount of goods or services you would be able to purchase.
77
A bond whose price will rise above its face value is classified as
Discuss
Answer & Solution
Answer: Option B
Solution:
A bond whose price will rise above its face value is classified as premium bond. A premium bond is a bond trading above its face value or in other words; it costs more than the face amount on the bond.
78
Coupon rate of bond is also called
Discuss
Answer & Solution
Answer: Option D
Solution:
Coupon rate of bond is also called nominal rate and quoted rate. Coupon interest rates are determined as a percentage of the bond's par value, also known as the "face value." 
79
Bond's promised rate of return is also considered as
Discuss
Answer & Solution
Answer: Option C
Solution:
Bond's promised rate of return is also considered as yield to maturity. Yield to maturity (YTM) is the total return anticipated on a bond if the bond is held until it matures. Yield to maturity is considered a long-term bond yield but it is expressed as an annual rate.
80
A premium which reflects possibility of issuer who does not pay principal amount of bonds is called
Discuss
Answer & Solution
Answer: Option C
Solution:
A premium which reflects possibility of issuer who does not pay principal amount of bonds is called default risk premium. A default risk premium is effectively the difference between a debt instrument's interest rate and the risk-free rate.