MGT411 Solved MCQ5 from Quiz #2

MGT411 Solved MCQ5 from Quiz #2

Chapter 1-22

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Spreading involves:

Select correct option:

 

Finding assets whose returns are perfectly negatively correlated

Building a portfolio of assets whose returns move together

Investing in bonds and avoiding stocks during bad times

Adding assets to a portfolio that move independently

 

Internal Rate of Return is _________.

Select correct option:

 

Present value of investment

Future value of its investment +Cost of investment

Cost of investment

Present value of investment + cost of investment

 

 

 

Which of the following best describes checks? 

Select correct option: 

 A means of payment

 Money

 Not a promise of any kind

 Not acceptable by the U.S. Government for payment of taxes.

 

A business cycle downturn shifts the bond supply to the:

Select correct option:

Right

Left

No change

None of the given options

 

According to the liquidity premium theory of the term structure, when the yield curve has its usual slope, the market expects

Select correct option:

 

Short-term interest rates to rise sharply

Short-term interest rates to stay near their current levels

Short-term interest rates to drop sharply

Short-term interest rates does not change

  

Which of the following represents the fisher's equation?

Select correct option:

 

Nominal interest rate = real interest rate + inflation

Nominal interest rate + inflation = real interest rate

Nominal interest rate = real interest rate - inflation

Nominal interest rate = real interest rate / inflation

 

Bonds that are issued by Government are called _________.

Select correct option:

 

Government bond

Treasury bond

Corporate bond

Callable Bonds

  

What will the yield curve look like if future short-term interest rates are expected to rise sharply?

Select correct option:

 

It will steeply slope upward

It will be horizontal

It will slightly slope upward

It will slope downward

  

The interest rate that is involved in _____________ calculation is referred to as discount rate

Select correct option:

Present value

Future value

Intrinsic value

Discount value

  

Which one of the following is true for the relationship between the yield of taxable and tax exempt bond?

Select correct option:

Higher the tax rate wider the gap between the yield of taxable and tax exempt bond

Taxable bond yield is always greater than tax exempt bond

Higher the tax rate shorter the gap between yield of taxable and tax exempt bond

Lower the tax rate wider the gap between yield of taxable and tax exempt bond

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You start with a $1000 portfolio; it loses 40% over the next year, the following year it gains 50% in value; At the end of two years the worth of your portfolio will be:

Select correct option:

$900

$600

$1000

$1100

 

first year gain = 1000*.40 = 400

second year loss = 1000*.5 =  500

Total gain or loss after two year = 400-500 = -100

1000-100 = 900

.

What is true relationship between return and risk?

Select correct option:

Lower the risk greater the return

Greater the risk greater the return

Greater the risk the return will remain constant

No relationship between them

 

Which of the following is NOT included in the definition of M1?

Select correct option:

Traveler's checks

Demand deposits

Currency

Gold coins issued by treasury

   

 

The 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 one of the following agencies assesses the default risk of different issuers?

Select correct option:

Insurance companies

Bond issuing

Credit rating

Recruitment agencies

  

In which of the following bonds we may ignore the default risk?

Select correct option:

Privately issued bonds

Government issued bonds

Bonds issued by Corporate

All of the given options

 

Which of the following best describes default risk?

Select correct option:

The chance the issuer will be unable to make interest payments or repay principal

The chance the issuer will retire the debt early

The chance the issuing firm will be sold to another firm

The chance the issuer will sell more debt

  

  

Coupon bonds make the annual payments which are called as ___________.

Select correct option:

Annual payments

Fixed payments

Coupon payments

Maturity payment