All Free Management Sciences MCQs with Answers

• A. Zero risk bonds
• B. Zero bonds
• C. Foreign bonds
• D. Government bonds

Explanation: A foreign bond is issued in one country by a government or corporation from another country.

• A. Capital gain yield interest yield
• B. Return yield + stable yield
• C. Return yield + unstable yield
• D. Par value + market value

Explanation: A bond’s percentage return combines the interest or coupon yield with the capital gain or loss yield.

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

Explanation: When the market rate falls below the coupon rate, the bond’s fixed payments are more attractive than newly issued alternatives, so…

• A. Reinvestment premium
• B. Investment risk premium
• C. Maturity risk premium
• D. Defaulter's premium

Explanation: The maturity risk premium compensates investors for risks that increase with the time to maturity, including interest-rate and…

• A. Payment interest
• B. Par interest
• C. Coupon interest
• D. Yearly interest rate

Explanation: The rate used to compute a bond’s periodic coupon payment is its coupon interest rate, applied to the bond’s par value.

• A. Remains same
• B. Becomes stable
• C. Becomes change
• D. Becomes low

Explanation: A fixed-rate bond promises the same coupon payment at each scheduled payment date until maturity, regardless of later market-rate changes.

• A. Organized markets
• B. Trade markets
• C. Counter markets
• D. Bond markets

Explanation: The bond market is commonly an over-the-counter dealer market rather than a single centralized exchange.

• A. Income bonds
• B. Callable bonds
• C. Premium bonds
• D. Default free bonds

Explanation: Callable bonds create greater reinvestment risk because the issuer may redeem them when interest rates fall, forcing investors to reinvest…

• A. Convertible bonds
• B. Stock bonds
• C. Shared bonds
• D. Common bonds

Explanation: A convertible bond gives its holder the contractual right to convert the bond into shares of the issuing company’s common stock under…

• A. Rising bet rate
• B. Floating rate debt
• C. Market rate debt
• D. Stable debt rate

Explanation: A floating-rate debt instrument has an interest rate that resets with a reference market rate, so its rate can rise when market rates…

• A. classified bond
• B. Discount bond
• C. Compound bond
• D. Consideration earning

Explanation: A bond selling below its par or face value is sold at a discount, so it is called a discount bond.

• A. Provision protection
• B. Provision protection
• C. Deferred protection
• D. Call protection

Explanation: A deferred call prevents the issuer from redeeming the bond during an initial period, providing call protection to investors.

• A. Required interest rate
• B. Quoted risk-free interest rate
• C. Liquidity risk-free interest rate
• D. Premium risk-free interest rate

Explanation: Adding the real risk-free rate to the expected inflation premium gives the quoted or nominal risk-free rate.

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

Explanation: The stated or face value printed on a bond is its par value, commonly the amount repaid at maturity.

• A. Premium face value
• B. Premium bond
• C. Premium stock
• D. Premium warrants

Explanation: When a bond’s market price rises above its face value, it trades at a premium and is called a premium bond.

• A. Never changes
• B. Increases
• C. Decreases
• D. Earned

Explanation: Bond prices and market interest rates move in opposite directions because existing coupon payments become more attractive when new market…

• A. Income bond
• B. Interest bond
• C. Payment bond
• D. Earning bond

Explanation: An income bond promises interest only when the issuing company has sufficient earnings to make the payment.

• A. Inflation premium
• B. Off season premium
• C. Nominal premium
• D. Required premium

Explanation: The inflation premium compensates investors for the average inflation expected during the security’s life, since inflation reduces the…

• A. At bond issuance
• B. Expected in future
• C. Expected at time of maturity
• D. Expected at deferred call

Explanation: The inflation component included in a bond’s interest rate reflects inflation expected in the future over the investment period.

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

Explanation: The required rate of return is the market return investors demand for a bond’s risk, maturity, liquidity and other characteristics.