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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-1 section-8

Each section contains 100 MCQs on Financial Management .
1
Stocks which has lower book for market ratio are considered as
Discuss
Answer & Solution
Answer: Option C
Solution:
Stocks which has lower book for market ratio are considered as less risky. A company whose stock is trading at a discount on its book value is not necessarily cheap. In particular, you should expect companies that have low returns on equity, high risk and low growth potential to trade at low price to book ratios.
2
An individual stock required return is equal to risk free rate plus bearing risk premium is an explanation of
Discuss
Answer & Solution
Answer: Option A
Solution:
An individual stock required return is equal to risk free rate plus bearing risk premium is an explanation of security market line. The security market line (SML) is a line drawn on a chart that serves as a graphical representation of the capital asset pricing model (CAPM), which shows different levels of systematic, or market, risk of various marketable securities plotted against the expected return of the entire market at a given point in time.
3
Future beta is needed to calculate in most situations is classified as
Discuss
Answer & Solution
Answer: Option A
Solution:
Future beta is needed to calculate in most situations is classified as historical betas. A beta coefficient is a measure of the volatility, or systematic risk, of an individual stock in comparison to the unsystematic risk of the entire market.
4
An efficient set of portfolios represented through graph is classified as an
Discuss
Answer & Solution
Answer: Option B
Solution:
An efficient set of portfolios represented through graph is classified as an efficient frontier. The efficient frontier is the set of optimal portfolios that offer the highest expected return for a defined level of risk or the lowest risk for a given level of expected return.
5
Rational traders immediately buy stock when price is
Discuss
Answer & Solution
Answer: Option A
Solution:
Rational traders immediately buy stock when price is too low.
6
All points lie on line if degree of dispersion is
Discuss
Answer & Solution
Answer: Option B
Solution:
All points lie on line if degree of dispersion is one. Dispersion is a statistical term that describes the size of the range of values expected for a particular variable. In finance, dispersion is used in studying the effects of investor and analyst beliefs on securities trading, and in the study of the variability of returns from a particular trading strategy or investment portfolio.
7
A high portfolio return is subtracted from low portfolio return to calculate
Discuss
Answer & Solution
Answer: Option A
Solution:
A high portfolio return is subtracted from low portfolio return to calculate HML portfolio. HML is one of three factors in the original Fama and French's Three-Factor model, which is often used to evaluate a portfolio manager's returns.
8
Second step in determining efficient portfolios is to consider efficient subset from set of
Discuss
Answer & Solution
Answer: Option A
Solution:
Second step in determining efficient portfolios is to consider efficient subset from set of attainable portfolios. The feasible, or attainable, set represents all portfolios that can be constructed from a given set of stocks. This set is only efficient for part of its combinations. An efficient portfolio is that portfolio which provides the highest expected return for any degree of risk.
9
If market value is greater than book value then investors for future stock are considered as
Discuss
Answer & Solution
Answer: Option D
Solution:
If market value is greater than book value then investors for future stock are considered as optimistic.
10
According to capital asset pricing model assumptions, investors will borrow unlimited amount of capital at any given
Discuss
Answer & Solution
Answer: Option B
Solution:
According to capital asset pricing model assumptions, investors will borrow unlimited amount of capital at any given risk free rate of interest. 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.