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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-7

Each section contains 100 MCQs on Financial Management .
71
According to Black Scholes model, selling and buying of stock have
Discuss
Answer & Solution
Answer: Option B
Solution:
According to Black Scholes model, selling and buying of stock have transaction costs. Transaction costs are expenses incurred when buying or selling a good or service.
72
Stock option is more worthwhile if it is
Discuss
Answer & Solution
Answer: Option A
Solution:
Stock option is more worthwhile if it is extremely 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.
73
According to Black Scholes model, call option is well exercised on its
Discuss
Answer & Solution
Answer: Option B
Solution:
According to Black Scholes model, call option is well exercised on its expiry date. Black-Scholes is a pricing model used to determine the fair price or theoretical value for a call or a put option based on six variables such as volatility, type of option, underlying stock price, time, strike price, and risk-free rate.
74
Sellers of options in financial markets are classified as
Discuss
Answer & Solution
Answer: Option B
Solution:
Sellers of options in financial markets are classified as option writer. A writer of a call option promises to sell the underlying investment to the call purchaser, who has bought the right to purchase it at a specific price.
75
In option pricing, an increasing in option price due to
Discuss
Answer & Solution
Answer: Option A
Solution:
In option pricing, an increasing in option price due to time of expiry 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.
76
Type of options in which buyer of options has call on 200 shares in stock is classified as
Discuss
Answer & Solution
Answer: Option A
Solution:
Type of options in which buyer of options has call on 200 shares in stock is classified as call option. Call options are agreements that give the option buyer the right, but not the obligation, to buy a stock, bond, commodity or other instrument at a specified price within a specific time period.
77
Movement of price or rise or fall of prices of options is classified as
Discuss
Answer & Solution
Answer: Option D
Solution:
Movement of price or rise or fall of prices of options is classified as binomial lattice. The binomial options pricing model provides a generalizable numerical method for the valuation of options. Essentially, the model uses a "discrete-time" model of the varying price over time of the underlying financial instrument, addressing cases where the closed-form Black–Scholes formula is wanting.
78
Variability of stock price, option term to maturity and risk free rate are dependents of
Discuss
Answer & Solution
Answer: Option A
Solution:
Variability of stock price, option term to maturity and risk free rate are dependents of price of an option. Variability is the extent to which data points in a statistical distribution or data set diverge from the average value as well as the extent to which these data points differ from each other.
79
Value of option which is considered as its worth as soon as it is expired is classified as
Discuss
Answer & Solution
Answer: Option D
Solution:
Value of option which is considered as its worth as soon as it is expired is classified as exercise value. The profit that an option holder would receive by exercising an in-the-money option. That is, the exercise value of an option is how much the strike price is below the underlying asset (for a call) or above the underlying asset (for a put).
80
Current value of stock including in portfolio is subtracted from present value of portfolio to calculate
Discuss
Answer & Solution
Answer: Option C
Solution:
Current value of stock including in portfolio is subtracted from present value of portfolio to calculate current option price.