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 20 of 49
- A. up and to the left
- B. up and to the right
- C. down and to the left
- D. down and to the right
Explanation: An increase in monetary expansion adds funds to the financial system, shifting the supply curve to the right.
Correct answer: down and to the right- A. (1+r) c - 1
- B. (2+r) c - 2
- C. (3+r) c - 3
- D. (1+r) c - 5
Explanation: When r is the return per compounding period and c is the number of periods, the effective annual return is calculated as (1+r)^c − 1.
Correct answer: (1+r) c - 1- A. support from World Bank
- B. decreases in funds traded
- C. increase in funds traded
- D. rise of international funds
Explanation: A leftward shift in the demand curve means borrowers want fewer funds at each interest rate, so the equilibrium amount of funds traded…
Correct answer: decreases in funds traded- A. term structure of segmentation
- B. term structure of interest rate
- C. term structure of premium
- D. term structure of inflation
Explanation: Liquidity preference, unbiased expectations, and market segmentation are competing explanations of the term structure of interest rates…
Correct answer: term structure of interest rate- A. compound interest
- B. investment risk
- C. interest rate
- D. stated rate
Explanation: When earned interest is added to the investment and itself earns further interest, the process is compounding.
Correct answer: compound interest- A. increase in availability
- B. decrease in availability
- C. decrease in interest rate
- D. increase in interest rate
Explanation: Present value falls as the interest rate rises because future cash flows are discounted more heavily.
Correct answer: increase in interest rate- A. present value of annuity
- B. future value of annuity
- C. decreased value of annuity
- D. increased value of annuity
Explanation: Future value of an annuity accumulates a series of equal payments to their value at the end of the investment period.
Correct answer: future value of annuity- A. zero demand of funds
- B. equilibrium demands of funds
- C. higher demand of funds
- D. lower demand of funds
Explanation: In loanable-funds theory, a lower interest rate reduces the cost of borrowing, encouraging households and firms to demand more funds.
Correct answer: higher demand of funds389. The curve representing demand of the funds shifts to the left if economic growth in ___________?
- A. global market is stagnant
- B. global market is not stagnant
- C. domestic market is stagnant
- D. domestic market is not stagnant
Explanation: Stagnant domestic economic growth generally reduces profitable investment opportunities, shifting the demand for funds to the left.
Correct answer: domestic market is stagnant- A. decreased value of annuity
- B. increased value of annuity
- C. present value of annuity
- D. future value of annuity
Explanation: Present value of an annuity converts equal future payments into their equivalent value at the beginning of the investment period.
Correct answer: present value of annuity- A. higher
- B. zero
- C. upside
- D. lower
Explanation: An increase in demand for loanable funds puts upward pressure on the equilibrium interest rate, which is the borrowing cost of funds.
Correct answer: higher- A. domestic market is stagnant
- B. domestic market is not stagnant
- C. global market is stagnant
- D. global market is not stagnant
Explanation: Stagnant domestic growth creates fewer investment opportunities, so firms and other participants have less reason to borrow funds.
Correct answer: domestic market is stagnant- A. compounded funds
- B. savings funds
- C. supply of loan-able funds
- D. demand of loan-able funds
Explanation: Suppliers of funds provide the supply of loanable funds, mainly through savings that can be lent or invested.
Correct answer: supply of loan-able funds394. The factors that can affect nominal interest rates in financial transactions include _________?
- A. special provisions
- B. liquidity and default risk
- C. inflation and real interest arte
- D. all of the aboveHire An Accountant
Explanation: Nominal interest rates reflect the real rate plus expected inflation, and are also affected by liquidity, default risk, and contractual…
Correct answer: all of the aboveHire An Accountant- A. savings
- B. interest rate
- C. future value
- D. present valueGet Study Guides
Explanation: The loanable-funds theory explains how the interaction of saving and borrowing determines the equilibrium interest rate.
Correct answer: interest rate- A. interest portion of RIAPS
- B. interest portion of STORI
- C. interest portion of STRIPS
- D. interest portion of bondsCompare Personal Loans
Explanation: STRIPS separate a Treasury security into individual principal and interest cash flows, allowing investors to select maturities that match…
Correct answer: interest portion of STRIPS- A. call price of bond
- B. premium price of bond
- C. call price of stock
- D. discounted price of stock
Explanation: The call price is the amount an issuer must pay to redeem a callable bond, calculated as its face value plus the call premium.
Correct answer: call price of bond- A. pays indexed prices
- B. pays same price
- C. pays different price
- D. pays inflated pricesGet Corporate Bonds
Explanation: In a single-price, or uniform-price, auction, all successful bidders receive the securities at the same accepted price.
Correct answer: pays same price399. The type of bonds which is fully backed by credit and faith of issuer is classified as __________?
- A. general obligation tax
- B. general obligation savings
- C. general obligation bonds
- D. general obligation notes
Explanation: General obligation bonds are supported by the issuer's full faith, credit, and taxing power rather than by a specific revenue-producing…
Correct answer: general obligation bonds- A. clean price
- B. full price
- C. dirty price
- D. accrued price
Explanation: The clean price is the quoted bond price excluding accrued interest. The amount including accrued interest is called the dirty price or…
Correct answer: clean price