MGT411 Solved MCQ10 from Quiz #2

MGT411 Solved MCQ5 from Quiz #2

The fact that common stockholders are residual claimants means: 

Select correct option: 

The stockholders receive the remains after everyone else is paid

The stockholders are paid any past due dividends before other claims are paid

The common stockholders are responsible for all corporate debts

Which one of the following is true for financial intermediaries? 

Select correct option: 

Channel funds from savers to borrowers

Greatly enhance economic efficiency

Have been an source of many financial innovations

All of the given options

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relationship between the price and the interest rate for a zero coupon bond is best described as: 

Select correct option: 

Volatile

Stable

Non-existent 

Inverse 

Reference: The price of a bond and the interest rate move in opposite directions                                

Consumer Price Index (CPI) measures the: 

Select correct option: 

Changes in the quantity

Changes in the prices

Changes in the cost

Changes in the profit

Reference: CPI :Measure of the overall level of prices 

Core principles of Money and Banking include each of the following except? 

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People act rationally

Time has value

Information is the basis for decisions

Risk requires compensation

The longer the time (n) until the payment: 

Select correct option: 

The lower the present value

The higher the present value because time is valuable

The lower must be the interest rate

Time has no effect on present value

When stock prices reflect fundamental values: 

Select correct option: 

All investors will experience capital gains

All companies will have an easier task of obtaining financing for investment projects

The allocation of resources will be more efficient

The overall level of the stock market should move higher continuously

Reference: So long as stock prices accurately reflect fundamental values, this resource allocation mechanism works well

What will be the result of the difference of real and nominal interest rate? 

Select correct option: 

The cost of borrowing

The effect of inflation

The price of bonds

The return of bonds

If the annual interest rate is 6%, the price of a 1-year Treasury bill with $100 face value would be: 

Select correct option: 

$94.00

$94.33

$95.25

$96.10

Which of the following would probably NOT earn an A rating from Standard & Poor's: 

Select correct option: 

30 years bond issued by the U.S. Treasury

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90 days T-Bills issued by the U.S. Treasury

Both 30 years bond and 90 days T-Bills issued by U.S. Treasury 

There is no guarantee that a bond issuer will make the promised payments is known as which one of the following? 

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Default risk

Inflation risk

Interest rate risk

Systematic risk

If a bond sells at a premium, where price exceeds face value, then we would expect to see: 

Select correct option: 

Market interest rate the same as the coupon rate

Market interest rates above the coupon rate 

Market interest rates below the coupon rate 

All of the given options

Reference: So, When Market Interest Rate < Coupon Interest Rate, Market Value (or Price) of Bond >Par Value. Because when market is offering lower rate of return then the bond then the bond becomes
valuable. This is known as a Premium Bond. Pg no.68 MGT201 H.outs

Which of the following is a role of a financial institution acting as a financial intermediary? 

Select correct option: 

Pooling the resources of small savers

Formulating oversight regulations

Sending out free calendars at the holidays

Lobbying legislators

Reference: The most straightforward economic function of a financial intermediary is to pool the resources of many small savers Pg no.71 MGT411 H.outs

Financial Systems makes it easier to trade because it: 

Select correct option: 

Facilitate Payments 

Channels Funds from Savers to Borrowers 

Enables Risk Sharing 

All of the given options

Which of the following is the measure of likelihood that an event will occur? 

Select correct option: 

Risk

Probability

Frequency

Outcom

The concept of limited liability says a stockholder of a corporation: 

Select correct option: 

Is liable for the corporation's liabilities, but nothing more

Cannot receive dividends that exceed their investment

Cannot own more than fiver percent of any public corporation

Cannot lose more than their investment

Reference: Because of limited liability, investor's losses cannot exceed the price they paid for the
stock Pg no.63 MGT411 H.outs

The risk premium for an investment: 

Select correct option: 

 Increases with risk

Is a fixed amount added to the risk free return

Is negative for U.S. Treasury Securities

Is negative for risk averse investors