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 22 of 49
- A. 1963
- B. 1953
- C. 1983
- D. 1962
Explanation: The first widely recognized Eurobond was issued in 1963 by Autostrade, an Italian motorway company.
Correct answer: 1963- A. international markets
- B. national markets
- C. local markets
- D. state markets
Explanation: International markets handle bonds issued across national borders, often through underwriting syndicates made up of institutions from…
Correct answer: international markets- A. federal savings bank
- B. state savings banks
- C. Federal Reserve banks
- D. state reserve banks
Explanation: In the US Treasury market, non-competitive bids are submitted through Federal Reserve Banks, which process Treasury auction orders for…
Correct answer: Federal Reserve banks- A. treasury inflation protection securities
- B. treasury inflation protection notes
- C. treasury inflation commercial papers
- D. inflation coupon protection securities
Explanation: US Treasury inflation-indexed bonds are called Treasury Inflation-Protected Securities, or TIPS.
Correct answer: treasury inflation protection securities- A. private indenture
- B. bond indenture
- C. long term indenture
- D. federal indenture
Explanation: A bond indenture is the legal agreement that states the bond's terms and includes covenants governing the issuer's conduct.
Correct answer: bond indenture- A. fixed principal
- B. inflation indexed
- C. coupon index
- D. both A and B
Explanation: Treasury issues both conventional securities with a fixed principal and inflation-indexed securities whose principal adjusts with…
Correct answer: both A and B- A. trustee bonds
- B. local bonds
- C. bearer bonds
- D. nearer bonds
Explanation: Bearer bonds traditionally have detachable coupons that the holder presents to receive interest when it falls due.
Correct answer: bearer bonds- A. secondary stock system
- B. primary stock system
- C. automated stock system
- D. automated bond system
Explanation: The Automated Bond System, or ABS, was the New York Stock Exchange system designed for automated bond quotation and order execution.
Correct answer: automated bond system- A. bond rating agencies
- B. bond issuance agencies
- C. federal placement
- D. private pavement agencies
Explanation: Bond rating agencies assess and publish information about the creditworthiness of sovereign and corporate borrowers.
Correct answer: bond rating agencies- A. registered debt holders
- B. secured debt holders
- C. unsecured debt holders
- D. unregistered debt holders
Explanation: Debentures are generally unsecured, so their holders rank behind secured creditors, whose collateral gives them priority in repayment.
Correct answer: secured debt holders- A. infrequent origination
- B. static trading
- C. frequent trading
- D. infrequent trading
Explanation: Municipal bonds usually trade infrequently in secondary markets because many issues are held by investors until maturity and are less…
Correct answer: infrequent trading- A. short term capital outlays
- B. long term capital outlays
- C. long term finance outlays
- D. long term bonds outlays
Explanation: Municipal bonds generally finance long-lived public projects such as roads, schools, and water systems, which are long-term capital…
Correct answer: long term capital outlays- A. collateral security
- B. commercial trust notes
- C. equipment trust certificates
- D. equipment bonds
Explanation: Equipment trust certificates are secured by tangible equipment, such as aircraft, railway cars, or other transport assets.
Correct answer: equipment trust certificates- A. registered issue
- B. unregistered issue
- C. federal issue
- D. negotiable issue
Explanation: A private placement is offered to a limited group of investors and is generally exempt from the public registration process.
Correct answer: unregistered issue- A. $10000 and $20000
- B. $5000 and $10000
- C. $6000 and $11000
- D. $8000 and $15000
Explanation: Eurobonds are commonly issued in denominations of $5,000 and $10,000, making option b the standard pair.
Correct answer: $5000 and $10000- A. One set of payment
- B. Two sets of payments
- C. Three sets of payments
- D. Four sets of payments
Explanation: STRIPS separate a bond’s principal and coupon payments, allowing an investor to receive a single payment at maturity from each stripped…
Correct answer: One set of payment- A. automated
- B. discounted
- C. rated
- D. stocked
Explanation: Institutional investors generally require bonds to be rated so that the issuer’s credit risk and default probability can be assessed.
Correct answer: rated- A. 16.92
- B. 18.92
- C. 13.92
- D. 11.92
Explanation: The current stock price equals conversion value divided by the conversion rate: $7,000 ÷ 370 = about $18.92.
Correct answer: 18.92- A. after tax rate of return
- B. before tax rate of return
- C. corporative rate of return
- D. federal rate of return
Explanation: Municipal bond interest is generally exempt from federal income tax, so its relevant yield is treated as an after-tax rate of return.
Correct answer: after tax rate of return- A. Australian bonds
- B. Eurobonds
- C. interbank bonds
- D. interbank bonds
Explanation: A bond issued in a European financial market but denominated in a currency such as U.S. dollars is a Eurobond.
Correct answer: Eurobonds