All Free Management Sciences MCQs with Answers

• A. Negative
• B. Zero
• C. Positive
• D. Independent

Explanation: When a project's discounted cash inflows exactly recover the invested capital at the required rate of return, its net present value is…

• A. Less project returns
• B. Greater project return
• C. Shorter payback period
• D. Greater payback period

Explanation: A shorter payback period generally indicates greater liquidity because the investment is recovered sooner, holding other factors constant.

• A. Relative outflow
• B. Relative inflow
• C. Relative cost
• D. Relative profitability

Explanation: Modified internal rate of return improves the conventional IRR by incorporating financing and reinvestment assumptions, making project…

• A. Optimal rationing
• B. Capital rationing
• C. Marginal rationing
• D. Transaction rationing

Explanation: Capital rationing occurs when a firm imposes a limit on the funds available for capital expenditures, forcing it to choose among competing…

• A. Greater than two
• B. Equal to
• C. Less than one
• D. Greater than one

Explanation: The profitability index equals the present value of future cash inflows divided by the initial investment.

• A. Technical equity
• B. Defined future value
• C. Project net present value
• D. Equity net present value

Explanation: Net present value is obtained by summing all cash flows after discounting them to present value, including the initial investment outflow.

• A. Negative numbers
• B. Positive numbers
• C. Hurdle number
• D. Relative number

Explanation: Cash outflows reduce the project's net cash flow, so they are recorded as negative numbers in capital-budgeting calculations.

• A. Rise in marginal cost of capital
• B. Fall in marginal cost of capital
• C. Rise in transaction cost of capital
• D. Rise in transaction cost of capital

Explanation: A large expansion can increase the project's risk and require flotation expenses such as underwriting and issuance costs.

• A. Short maturity bonds
• B. High maturity bonds
• C. High premium bonds
• D. High inflated bonds

Explanation: Short-maturity bonds return principal sooner, so the investor must reinvest the proceeds sooner and faces greater exposure to falling…

• A. Depreciated bond
• B. Interest bond
• C. Zero coupon bond
• D. Appreciation bond

Explanation: A zero-coupon bond makes no periodic coupon payments and is normally issued below face value, with the investor's return coming from its…

• A. Nominal rate
• B. Premium rate
• C. Quoted rate
• D. Both a and c

Explanation: The coupon rate is the stated or quoted annual interest rate applied to a bond's par value, so both “nominal rate” and “quoted rate”…

• A. Junk bonds
• B. Outstanding bonds
• C. Standing bonds
• D. Premium bonds

Explanation: Bond prices and market interest rates move inversely: when rates rise, existing bonds with lower coupon rates become less attractive and…

• A. Issued security
• B. Treasury bonds
• C. U.S bonds
• D. Return security

Explanation: Treasury bonds are government debt securities backed by the issuing government, including Pakistan's government in this context. “U.S.

• A. Bond value
• B. Per value
• C. State value
• D. Par value

Explanation: Par value is the face value that the issuing firm promises to repay to the bondholder at maturity.

• A. Original maturity
• B. Permanent maturity
• C. Artificial maturity
• D. Valued maturity

Explanation: Original maturity is the period from the bond's issuance until its stated repayment date.

• A. Municipal bonds
• B. Corporation bonds
• C. Default bonds
• D. Zero bonds

Explanation: Municipal bonds are issued by local or state governments to finance public projects.

• A. Mature issue
• B. Earning issue
• C. New issue
• D. Recent issue

Explanation: A bond issued recently is called a new issue. A mature issue has reached or passed its maturity, while “recent issue” is not the standard…

• A. Provision
• B. Guarantee
• C. Warrants
• D. Convertibles

Explanation: Warrants give bondholders the right to purchase the issuer’s stock at a stated exercise price.

• A. Required rate of redemption
• B. Required rate of earning
• C. Required rate of return
• D. Required option

Explanation: The required rate of return is the discount rate used to calculate the present value of a bond’s future coupon payments and principal.

• A. Equal to return rate
• B. Seasoned price
• C. Below its par value
• D. Above its par value

Explanation: When the market rate exceeds the bond’s coupon rate, the bond’s fixed payments are less attractive, so its price falls below par value.