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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-9 section-7

Each section contains 100 MCQs on Financial Management .
81
Call options situation in which strike price is greater than current price of stock is classified as
Discuss
Answer & Solution
Answer: Option D
Solution:
Call options situation in which strike price is greater than current price of stock is classified as in-the-portfolio. 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.
82
If stock market price is higher than strike price so call option
Discuss
Answer & Solution
Answer: Option C
Solution:
If stock market price is higher than strike price so call option price will be higher. A stock market, equity market or share market is the aggregation of buyers and sellers of stocks, which represent ownership claims on businesses; these may include securities listed on a public stock exchange, as well as stock that is only traded privately.
83
First step in binomial approach of option pricing is to
Discuss
Answer & Solution
Answer: Option A
Solution:
First step in binomial approach of option pricing is to define ending price of stock. 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.
84
Present value of portfolio Rs 850 and current option price Rs 1620 then value of stock included in portfolio would be
Discuss
Answer & Solution
Answer: Option C
Solution:
Stock included in portfolio = Current option price- Present value of portfolio
= Rs. 1620 - Rs. 850 = Rs. 770.
85
Beta reflects stock risk for investors which is usually
Discuss
Answer & Solution
Answer: Option A
Solution:
Beta reflects stock risk for investors which is usually individual. The beta of an investment is a measure of the risk arising from exposure to general market movements as opposed to idiosyncratic factors.
86
For any or lower degree of risk, highest or any expected return are concepts use in
Discuss
Answer & Solution
Answer: Option D
Solution:
For any or lower degree of risk, highest or any expected return are concepts use in efficient portfolios. An efficient portfolio, also known as an 'optimal portfolio', is one that provides that best expected return on a given level of risk, or alternatively, the minimum risk for a given expected return.
87
An unsystematic risk which can be eliminated but market risk is the
Discuss
Answer & Solution
Answer: Option B
Solution:
An unsystematic risk which can be eliminated but market risk is the An unsystematic risk which can be eliminated but market risk is the remaining risk. Unsystematic risk is the risk that is inherent in a specific company or industry. By investing in a range of companies and industries, unsystematic risk can be drastically reduced through diversification.
88
An indication in a way that variance of y-variable is explained by x-variable which is shown as
Discuss
Answer & Solution
Answer: Option A
Solution:
An indication in a way that variance of y-variable is explained by x-variable which is shown as degree of dispersion is one. The measure of dispersion helps us to study the variability of the items. In a statistical sense, dispersion has two meanings: first it measures the variation of the items among themselves, and second, it measures the variation around the average.
89
In regression of capital asset pricing model, an intercept of excess returns is classified as
Discuss
Answer & Solution
Answer: Option C
Solution:
In regression of capital asset pricing model, an intercept of excess returns is classified as Jensen's alpha. Jensen's Alpha, also known as the Jensen's Performance Index, is a measure of the excess returns earned by the portfolio compared to returns suggested by the CAPM model. It represents by the symbol α. The value of the excess return may be positive, negative, or zero.
90
In arbitrage pricing theory, required returns are functioned of two factors which have
Discuss
Answer & Solution
Answer: Option D
Solution:
In arbitrage pricing theory, required returns are functioned of two factors which have dividend policy and market risk. Arbitrage pricing theory (APT) is a multi-factor asset pricing model based on the idea that an asset's returns can be predicted using the linear relationship between the asset’s expected return and a number of macroeconomic variables that capture systematic risk.