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 24 of 49
- A. price and supply to decrease
- B. price and supply to increase
- C. demand and size to decrease
- D. demand and size to increase
Explanation: Currency consolidation can create a larger and more liquid market, increasing investor demand and enabling larger Eurobond issues.
Correct answer: demand and size to increase- A. security of indentures
- B. security of unregistered bonds
- C. security of bearer bonds
- D. security of registered bondsBusiness Formation
Explanation: Bearer bonds can be transferred simply by delivery, so ownership is less protected if the bond is lost or stolen.
Correct answer: security of bearer bonds- A. investment bank
- B. insurance firm
- C. reissuing firm
- D. reselling firmBonds
Explanation: Under firm commitment underwriting, the investment bank buys the entire issue and resells it to investors.
Correct answer: investment bank- A. $1.65
- B. $220
- C. $900
- D. $0.0165
Explanation: The call premium is the amount by which the call price exceeds face value, so face value equals $560 − $340 = $220.
Correct answer: $220- A. only in issuing country
- B. stagnant exchange
- C. telephonic market
- D. over the counter marketInvesting
Explanation: Eurobonds are generally traded over the counter through an international network of banks and dealers rather than on a single central…
Correct answer: over the counter marketInvesting466. The legal contract which states the legal rights of seller and buyer is classified as ___________?
- A. long term indenture
- B. federal indenture
- C. private indenture
- D. bond indenture
Explanation: A bond indenture is the formal legal agreement defining the rights and obligations of the issuer and bondholders.
Correct answer: bond indenture- A. indenture bonds
- B. trustee bonds
- C. collateral bonds
- D. mortgage bonds
Explanation: Mortgage bonds are secured by specified collateral, usually real estate or project assets, and are commonly used to finance identifiable…
Correct answer: mortgage bonds- A. full price investors
- B. household investors
- C. corporation investors
- D. clean price investors
Explanation: Household investors often prefer municipal bonds because their interest may receive tax advantages and they generally provide relatively…
Correct answer: household investors- A. bonds with interbank rate
- B. bonds with intra market rate
- C. bonds with equity warrants
- D. bonds with common stock
Explanation: A Eurobond carrying an equity warrant gives the holder a right to purchase shares in addition to the bond claim, making it an…
Correct answer: bonds with equity warrants- A. insurance companies
- B. index banking firm
- C. commercial banking firm
- D. stock exchange
Explanation: Municipal bonds are commonly distributed through commercial banking firms acting as underwriters or investment-banking intermediaries.
Correct answer: commercial banking firm- A. parallel term income
- B. pledged
- C. volatile
- D. non-volatile
Explanation: When earnings are volatile, spreading bond maturities across several dates reduces the pressure of repaying the entire issue at one time.
Correct answer: volatile- A. treasury KIBOR notes
- B. treasury KIBOR bonds
- C. treasury zero coupon bonds
- D. treasury LIBOR bonds
Explanation: STRIPS are Treasury securities whose principal and interest payments are separated and sold as individual zero-coupon securities.
Correct answer: treasury zero coupon bonds- A. national debt
- B. international debt
- C. global debt
- D. contraction debt
Explanation: National debt is the accumulated borrowing of a country's federal government, reflecting past budget deficits and government expenditures…
Correct answer: national debt- A. contraction mortgages
- B. bonds and mortgages
- C. expansion bonds
- D. expansion mortgages
Explanation: Capital-market instruments generally have maturities exceeding one year, and the listed instruments fitting this description are bonds and…
Correct answer: bonds and mortgages- A. sinking fund provision
- B. sinking fund premium
- C. sinking fund discount
- D. floating fund provision
Explanation: A sinking fund provision requires the issuer to set aside funds or retire a specified portion of a bond issue periodically, often each…
Correct answer: sinking fund provision- A. not receive fee
- B. receive fee
- C. receive interest rate
- D. receive market rate of return
Explanation: Under a best-efforts offering, the investment bank acts as an agent and attempts to sell the securities without guaranteeing the entire…
Correct answer: receive fee- A. Brady bonds
- B. swapped bonds
- C. developed bonds
- D. developing bonds
Explanation: Brady bonds were issued in the 1980s and 1990s to restructure developing countries' outstanding commercial bank loans.
Correct answer: Brady bonds- A. dirty price
- B. clean price
- C. paid price
- D. unpaid price
Explanation: The dirty price includes both the quoted bond price and the interest accrued since the last coupon payment.
Correct answer: dirty price- A. Federal, local government & corporation
- B. Federal corporation
- C. government debts
- D. stock calculator
Explanation: Capital-market securities are primarily issued by governments and corporations to obtain long-term financing.
Correct answer: Federal, local government & corporation- A. corporate markets
- B. treasury markets
- C. bond markets
- D. municipal markets
Explanation: These markets are specifically called bond markets because they handle the issuance and trading of bonds.
Correct answer: bond markets