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.
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975 questions · page 21 of 49
- A. increased
- B. increased floatation rate
- C. decreased
- D. zero interest coupon
Explanation: Interest premiums on privately placed issues have generally decreased over time as the private-placement market became more competitive…
Correct answer: decreased- A. split bonds
- B. automated bonds
- C. junk bonds
- D. sinking bonds
Explanation: Standard & Poor’s ratings below BBB are below investment grade and are commonly called junk bonds.
Correct answer: junk bonds403. The current market price is multiplied to the conversion rate received on conversion to calculate ?
- A. conversion value
- B. current value
- C. market value
- D. stock value
Explanation: Conversion value is calculated by multiplying the current market price of the underlying stock by the bond’s conversion ratio.
Correct answer: conversion value- A. economic recession
- B. economically indexed
- C. not economically indexed
- D. active trading
Explanation: Municipal bonds can face default when recession weakens local economic activity, tax collections, and the issuer’s ability to meet debt…
Correct answer: economic recession- A. triple B rating bonds
- B. triple A rating bonds
- C. double A rating bonds
- D. double A rating bonds
Explanation: Triple-A bonds have the highest credit quality, so investors demand the smallest yield spread over Treasury securities of similar…
Correct answer: triple A rating bonds- A. zero coupon treasury notes
- B. zero coupon treasury bonds
- C. One payment bonds
- D. zero treasurer bonds
Explanation: Zero-coupon Treasury bonds provide a fixed amount at maturity and do not require reinvestment of periodic coupon payments, helping protect…
Correct answer: zero coupon treasury bonds- A. floating risk discount
- B. less risky
- C. more risky
- D. floating risk premium
Explanation: A sinking fund requires the issuer to retire part of the debt periodically, reducing the amount outstanding and the eventual repayment…
Correct answer: less risky- A. discount buying
- B. premium selling
- C. auction process
- D. direct selling
Explanation: The coupon rate on Treasury Inflation-Protected Securities is set through the Treasury auction process, while the principal is adjusted…
Correct answer: auction process- A. default risk free
- B. not default risk free
- C. not indexed
- D. must be indexed
Explanation: Municipal bonds are not completely free from default risk because the issuing government may face weak revenues or financial distress.
Correct answer: not default risk free410. The convertible bonds are considered as hybrid bonds because they have properties of _____________?
- A. debts
- B. common equity
- C. both debt and equity
- D. ordinate and subordinated
Explanation: Convertible bonds begin as debt instruments but give their holders the option to convert them into common shares, giving them an equity…
Correct answer: both debt and equity- A. split grade bonds
- B. investment grade bond securities
- C. portfolio grade bonds
- D. sinking grade bonds
Explanation: Investment-grade bonds meet the minimum credit-quality standards normally required for purchase by regulated institutions such as banks…
Correct answer: investment grade bond securities- A. discount premium
- B. discount provision
- C. call premium
- D. call provision
Explanation: A call provision allows the issuer to require bondholders to surrender their bonds, usually at a call price above par that includes a call…
Correct answer: call provision- A. least good premium
- B. least good discount price
- C. best efforts offering
- D. least good index
Explanation: Under a best-efforts offering, the investment bank does not guarantee the sale of the securities, so it avoids the inventory and…
Correct answer: best efforts offering- A. risen angel
- B. fallen angel
- C. fallen devil
- D. risen devil
Explanation: A fallen angel is a bond that was originally investment grade but was later downgraded to junk status.
Correct answer: fallen angel- A. raise taxes
- B. print money
- C. increase labor hours
- D. both A and B
Explanation: The federal government can finance promised payments by raising tax revenue or creating additional money, although printing money may…
Correct answer: both A and B416. The principal amount in the Treasury Inflation Protection Securities is considered as ____________?
- A. tax adjusted principal
- B. inflation adjusted principal
- C. auction adjusted principal
- D. premium adjusted principal
Explanation: Treasury Inflation-Protected Securities adjust their principal according to changes in the Consumer Price Index, so the relevant amount is…
Correct answer: inflation adjusted principal- A. company annual sale
- B. future sale of bonds
- C. past sale of bonds
- D. initial sale of bond
Explanation: In an underwriting arrangement, the underwriter may bear the risk that the bonds cannot be sold as expected during the initial offering.
Correct answer: initial sale of bond- A. bond markets
- B. classical set markets
- C. open end markets
- D. close end markets
Explanation: Bond markets bring together suppliers of long-term funds, such as investors, and demanders of funds, such as corporations and governments.
Correct answer: bond markets- A. non-convertible bonds
- B. premium convertible bonds
- C. discount convertible bonds
- D. convertible bonds
Explanation: Convertible bonds are hybrid securities because they combine regular debt features, such as interest and repayment, with the holder's…
Correct answer: convertible bonds- A. traditional international bonds
- B. traditional local bonds
- C. traditional global bonds
- D. traditional currency bonds
Explanation: Foreign bonds issued before the development of Eurobonds are commonly called traditional international bonds.
Correct answer: traditional international bonds