Free Business Finance MCQs with Answers
975 Business Finance MCQs from Management Sciences, each with the correct answer and a written explanation of why it is correct. Free and unlimited, with no account needed.
Business finance explains how organisations plan, obtain and use money while balancing risk, return and liquidity. Topics include financial statements, time value of money, budgeting, working capital, capital structure, sources of finance, investment appraisal and cost of capital. Capital budgeting evaluates long-term projects, whereas working capital manages day-to-day operations.
Last updated
975 questions · page 11 of 49
- A. developed mortgages
- B. dwelling mortgages
- C. commercial mortgages
- D. non-commercial mortgages
Explanation: Mortgages for income-producing properties such as shopping malls and office buildings are commercial mortgages.
Correct answer: commercial mortgages- A. secondary loan
- B. primary loan
- C. mortgages
- D. swapped mortgages
Explanation: A mortgage is a loan secured by real property, such as land, a house or another building.
Correct answer: mortgages- A. three institutions
- B. single investor
- C. multiple investor
- D. multiple institutions
Explanation: A primary mortgage is typically originated directly between one borrower and one lending institution or investor.
Correct answer: single investor- A. repurchase agreement yields
- B. purchase agreement yields
- C. repurchase yields
- D. transaction yields
Explanation: A repurchase agreement yield uses the difference between the repurchase and selling prices, annualised over the 360-day money-market year…
Correct answer: repurchase agreement yields- A. higher than other one
- B. lower than other one
- C. contraction than other one
- D. expansionary than other one
Explanation: Eurodollar certificates of deposit generally pay higher rates because dollar deposits outside the United States are not subject to the…
Correct answer: higher than other one- A. annual loan market
- B. federal funds market
- C. functional funding market
- D. secured funding market
Explanation: The federal funds market provides banks with highly liquid, short-term funds, often overnight, to manage reserve positions.
Correct answer: federal funds market- A. forgone cost
- B. debt cost
- C. opportunity cost
- D. balances cost
Explanation: The benefit forgone when cash is held instead of invested or used elsewhere is its opportunity cost.
Correct answer: opportunity cost- A. extensive funds
- B. federal funds
- C. intensive funds
- D. premium funds
Explanation: Overnight borrowing and lending among banks is conducted in the federal funds market.
Correct answer: federal funds- A. 0.525
- B. 0.4114
- C. 0.4214
- D. 0.4514
Explanation: The discount yield is calculated as (10,000 − 8,000) ÷ 10,000 × 360 ÷ 175 = 0.4114, or about 41.14%.
Correct answer: 0.4114- A. decentralized
- B. centralized
- C. federalize
- D. commercialize
Explanation: A decentralized treasury-bill market has transactions conducted directly between participants through communication channels such as…
Correct answer: decentralized- A. face value
- B. book value
- C. premium value
- D. federal value
Explanation: Treasury bills are zero-coupon instruments issued below their face value and redeemed at face value on maturity.
Correct answer: face value- A. brokers and dealers
- B. corporations
- C. other financial institutions
- D. all of the above
Explanation: Commercial paper is bought by a broad group of money-market investors, including corporations, financial institutions, brokers, and…
Correct answer: all of the above- A. money markets
- B. capital markets
- C. debt markets
- D. economic markets
Explanation: Money markets deal in short-term instruments, whereas capital markets deal in longer-term debt and equity securities.
Correct answer: capital markets- A. federal funds
- B. premium funds
- C. discount funds
- D. mean funds
Explanation: Federal funds are short-term funds transferred, usually overnight, among depository institutions to manage reserve positions.
Correct answer: federal funds- A. repurchasing commercial notes
- B. repurchase bills
- C. repurchase agreement
- D. reverse repurchase agreement
Explanation: A repurchase agreement is a sale of securities with a promise by the seller to repurchase them later at a specified price.
Correct answer: repurchase agreement- A. borrowing rate
- B. supplying rate
- C. lending rate
- D. federal funds rate
Explanation: The federal funds rate is the interest rate charged on short-term loans of federal funds between eligible financial institutions.
Correct answer: federal funds rate- A. functional loans
- B. annual loans
- C. unsecured loans
- D. secured loans
Explanation: Federal funds transactions are generally unsecured loans between financial institutions, relying on the creditworthiness of the borrowing…
Correct answer: unsecured loans- A. highest bidder
- B. lower bidder
- C. zero bidder
- D. non-competitive bidder
Explanation: In a competitive treasury-bill auction, bids are ranked and the most favourable accepted bid receives allocation first; this is typically…
Correct answer: highest bidder- A. secured investors
- B. federal investors
- C. small investors
- D. large investors
Explanation: Non-competitive bidding lets applicants receive treasury bills at the auction’s accepted yield without competing on price.
Correct answer: small investors- A. money markets
- B. capital markets
- C. debt markets
- D. economic marketsAccounting & Auditing
Explanation: The money market deals in short-term instruments, generally maturing within one year, such as treasury bills and commercial paper.
Correct answer: money markets