All Free Management Sciences MCQs with Answers

• A. Standing bonds
• B. Outdated bonds
• C. Dated bonds
• D. Seasoned bonds

Explanation: A bond that has already been issued and is trading in the market is called an outstanding or seasoned bond.

• A. Higher
• B. Lower
• C. Variable
• D. Stable

Explanation: A convertible bond usually offers a lower coupon rate because investors also receive the valuable option to convert it into ordinary…

• A. Current yield
• B. Maturity yield
• C. Return yield
• D. Earning yield

Explanation: Current yield measures the bond’s annual interest payment relative to its current market price, so it changes as the bond price changes.

• A. Reinvestment risk
• B. Interest rate risk
• C. Investment risk
• D. Both A and B

Explanation: Treasury bonds are generally free from default risk, but they remain exposed to interest-rate risk and reinvestment risk.

• A. Inflated trading
• B. Default free trading
• C. Less frequently traded
• D. Frequently traded

Explanation: A high liquidity premium compensates investors for the difficulty of buying or selling the bond quickly at a fair price.

• A. Reduction in income
• B. Increment in income
• C. Matured income
• D. Frequent income

Explanation: Falling interest rates reduce the return available when coupon payments are reinvested, so the bondholder's overall income may decline.

• A. Corporation bonds
• B. Default bonds
• C. Risk bonds
• D. Zero risk bonds

Explanation: Bonds issued by companies are called corporate bonds, and unlike government bonds they carry a risk that the issuer may default.

• A. Evaluate cash flow
• B. Evaluate projects
• C. Evaluate budgeting
• D. Evaluate equity

Explanation: Net present value, profitability index, payback period and discounted payback period are capital-budgeting techniques used to assess…

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

Explanation: Cash inflows add money to a project and are conventionally recorded as positive numbers, while cash outflows are recorded as negative…

• A. Terminal value
• B. Existed value
• C. Quit value
• D. Relative value

Explanation: The compounded future value of a project's cash flows at the end of the forecast period is its terminal value.

• A. Negative economic value added
• B. Positive economic value added
• C. Zero economic value added
• D. Percent economic value added

Explanation: A positive NPV means the project earns more than its required return and adds value to the firm.

• A. Minimum life
• B. Present value life
• C. Economic life
• D. Transaction life

Explanation: The economic life of an asset is the period for which its use produces the highest present value of benefits relative to costs.

• A. Present value of equity
• B. Future value of equity
• C. Present value cash flow
• D. Future value of cash flow

Explanation: NPV compares the present value of expected future cash inflows with the initial investment, so the calculation begins by discounting the…

• A. Negative index
• B. Exchange index
• C. Project index
• D. Profitability index

Explanation: Profitability index is calculated as the present value of future cash flows divided by the initial project cost.

• A. Valued relationship
• B. Economic relationship
• C. Direct relationship
• D. Inverse relationship

Explanation: EVA and NPV generally have a direct relationship because both increase when a project earns returns above its cost of capital.

• A. Negative projects
• B. Relative projects
• C. Evaluate projects
• D. Earned projects

Explanation: The profitability index is a capital-budgeting tool used to evaluate and rank investment projects, especially when capital is limited.

• A. Higher net present value
• B. Lower net present value
• C. Zero net present value
• D. All of above

Explanation: Mutually exclusive projects cannot all be accepted, so they are compared and the project with the highest positive NPV is normally…

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

Explanation: When the present value of project cash inflows exceeds the capital invested, the excess is a positive net present value.

• A. Low dividends paid
• B. High risk prospect
• C. High growth prospect
• D. High marginal rate

Explanation: A high price-earnings ratio means investors are paying a high price for each unit of current earnings, usually because they expect strong…

• A. Marginal ratios
• B. Equity ratios
• C. Return ratios
• D. Market value ratios

Explanation: The price-earnings and price-to-cash-flow ratios relate a company's market price to earnings or cash flow, so they are market value, or…