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International Finance and Treasury MCQ Questions and Solutions with Explanations | Management

International Finance and Treasury MCQ Questions and answers with easy and logical explanations. Management provides you all type of quantitative and competitive aptitude mcq questions with easy and logical explanations. International FinanceMCQ is important for exams like MAT, CAT, CA, CS, CMA, CPA, CFA, UPSC, Banking and other Management department exam. Page-5 section-7

Each section contains 100 MCQs on International Finance and Treasury .
41
Type of bond whose present value is lesser than that of its face value is classified as
Discuss
Answer & Solution
Answer: Option A
Solution:
Type of bond whose present value is lesser than that of its face value is classified as discount bond. A discount bond is a bond that is issued for less than its par or face value. Discount bonds may also be a bond currently trading for less than its face value in the secondary market.
42
For an investment, weighted average time to maturity is considered as
Discuss
Answer & Solution
Answer: Option D
Solution:
For an investment, weighted average time to maturity is considered as duration. Duration is defined as the average time it takes to receive all the cash flows of a bond, weighted by the present value of each of the cash flows. Essentially, it is the payment-weighted point in time at which an investor can expect to recoup his or her original investment.
43
Bonds that does not pay any interest rate are considered as
Discuss
Answer & Solution
Answer: Option B
Solution:
Bonds that does not pay any interest rate are considered as zero coupon bond. A zero-coupon bond is a debt security instrument that does not pay interest. Zero-coupon bonds trade at deep discounts, offering full face value (par) profits at maturity. The difference between the purchase price of a zero-coupon bond and the par value, indicates the investor's return.
44
In zero coupon bonds, impact of lower duration on maturity is that
Discuss
Answer & Solution
Answer: Option A
Solution:
In zero coupon bonds, impact of lower duration on maturity is that maturity will be higher. A zero-coupon bond is a debt security instrument that does not pay interest. Zero-coupon bonds trade at deep discounts, offering full face value (par) profits at maturity. The difference between the purchase price of a zero-coupon bond and the par value, indicates the investor's return.
45
Interest rate that investors receive on financial security to calculate fair value of security is classified as
Discuss
Answer & Solution
Answer: Option C
Solution:
Interest rate that investors receive on financial security to calculate fair value of security is classified as required rate of return. The required rate of return is the minimum return an investor expects to achieve by investing in a project. An investor typically sets the required rate of return by adding a risk premium to the interest percentage that could be gained by investing excess funds in a risk-free investment.
46
Change in interest rate measured in percentage for given interest rate change is classified as
Discuss
Answer & Solution
Answer: Option B
Solution:
Change in interest rate measured in percentage for given interest rate change is classified as elasticity. Elasticity is a measure of a variable's sensitivity to a change in another variable. In business and economics, elasticity refers the degree to which individuals, consumers or producers change their demand or the amount supplied in response to price or income changes.
47
Type of bond for which bonds present value is greater than bonds face value is classified as
Discuss
Answer & Solution
Answer: Option D
Solution:
Type of bond for which bonds present value is greater than bonds 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. A bond might trade at a premium because its interest rate is higher than current rates in the market.
48
In zero coupon bonds, impact of higher duration on maturity is that
Discuss
Answer & Solution
Answer: Option D
Solution:
In zero coupon bonds, impact of higher duration on maturity is that maturity will be lower. A zero-coupon bond is a debt security instrument that does not pay interest. Zero-coupon bonds trade at deep discounts, offering full face value (par) profits at maturity. The difference between the purchase price of a zero-coupon bond and the par value, indicates the investor's return.
49
In zero coupon bonds, increase in duration with respect to maturity must be at
Discuss
Answer & Solution
Answer: Option A
Solution:
In zero coupon bonds, increase in duration with respect to maturity must be at decreasing rate. A zero-coupon bond is a debt security instrument that does not pay interest. Zero-coupon bonds trade at deep discounts, offering full face value (par) profits at maturity. The difference between the purchase price of a zero-coupon bond and the par value, indicates the investor's return.
50
More coupon payment or promised interest payment
Discuss
Answer & Solution
Answer: Option B
Solution:
More coupon payment or promised interest payment lower its duration. Duration is a measure of the sensitivity of the price of a bond or other debt instrument to a change in interest rates. A bond's duration is easily confused with its term or time to maturity because they are both measured in years.