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 26 of 49
- A. 0.0613
- B. 0.0713
- C. 0.08125
- D. 0.0913
Explanation: The after-tax return is calculated as pre-tax return multiplied by one minus the tax rate: 12.5% × (1 − 0.35) = 8.125%, or 0.08125.
Correct answer: 0.08125- A. more inflated
- B. less inflated
- C. less risky
- D. more risky
Explanation: General obligation bonds are backed by the taxing power of the issuing government, whereas revenue bonds depend on income from a…
Correct answer: more risky- A. treasury notes and bonds
- B. contraction bonds
- C. expansion bonds
- D. dollar bonds
Explanation: Treasury notes and Treasury bonds are government securities used to finance government spending and national debt.
Correct answer: treasury notes and bonds- A. contraction bonds
- B. expansion bonds
- C. dollar bonds
- D. bonds
Explanation: Bonds are long-term debt instruments through which governments and corporations borrow money from investors.
Correct answer: bonds- A. US.T-Bonds
- B. UK-T-Bonds
- C. UK-B-bonds
- D. US-B-Bonds
Explanation: Some bonds gain investor appeal through partial backing by highly secure US Treasury bonds, which lowers perceived default risk.
Correct answer: US.T-Bonds- A. related to international market
- B. related to equity
- C. related to common stock
- D. related to national marketHire An Accountant
Explanation: A convertible Eurobond gives its holder the right to exchange the bond for shares, so it has an equity-related feature.
Correct answer: related to equity- A. lower paid interest rates
- B. higher paid interest rates
- C. registered interest rates
- D. unregistered interest rates
Explanation: Privately placed bonds are less liquid and are sold to a limited group of investors, so issuers commonly have to offer higher interest…
Correct answer: higher paid interest rates- A. 5000
- B. 10000
- C. 12000
- D. 22000Try Prep Courses
Explanation: Municipal bonds are commonly issued in minimum denominations of $5,000, making option a the standard figure.
Correct answer: 5000- A. index commitment underwriting
- B. insurance underwriting
- C. default risk underwriting
- D. firm commitment underwritingGet Corporate Bonds
Explanation: Under firm commitment underwriting, the investment bank buys the entire new issue at an agreed price and assumes the risk of reselling it.
Correct answer: firm commitment underwritingGet Corporate Bonds- A. contributed bonds
- B. non-callable bonds
- C. callable bonds
- D. discounted bonds
Explanation: A callable bond includes a call option that benefits the issuer, so its return is adjusted for the option's value to estimate the return…
Correct answer: non-callable bonds- A. treasury basis
- B. corporate basis
- C. premium basis
- D. discount basisCompare Personal Loans
Explanation: Treasury bills are normally sold at a discount to face value and redeemed at face value on maturity.
Correct answer: discount basisCompare Personal Loans512. The yield on subordinated bonds as compared to non-subordinated bonds is considered as _________?
- A. highly risky and higher yields
- B. highly risky and lower yields
- C. less risky and higher yields
- D. less risky and lower yields
Explanation: Subordinated bondholders are paid after senior or non-subordinated bondholders if the issuer defaults, so subordinated bonds carry greater…
Correct answer: highly risky and higher yields- A. treasury notes and bonds
- B. corporate bonds
- C. municipal bonds
- D. all of the above
Explanation: Bond markets are commonly divided into Treasury or government bonds, corporate bonds, and municipal bonds.
Correct answer: all of the above- A. STORI
- B. STRIPS
- C. RIAPS
- D. STORIAP
Explanation: STRIPS means Separate Trading of Registered Interest and Principal of Securities, where the interest and principal components of a bond…
Correct answer: STRIPS- A. face value of bond
- B. face value of stock
- C. book value of stock
- D. book value of bond
Explanation: The call price equals the bond's face value plus the call premium, so subtracting the premium from the call price gives the face value.
Correct answer: face value of bond- A. high yield bonds
- B. low yield bonds
- C. zero floating bonds
- D. high floating rate bonds
Explanation: Junk bonds are below investment grade, commonly rated below BBB or Baa, and are therefore called high-yield bonds because investors demand…
Correct answer: high yield bonds- A. subordinated debentures
- B. ordinate debentures
- C. expansion debentures
- D. premium debentures
Explanation: Subordinated debentures rank below senior debentures and mortgage bonds in the repayment order if the issuer defaults.
Correct answer: subordinated debentures- A. local placement
- B. public offering
- C. government placement
- D. index placement
Explanation: Municipal bonds commonly enter the initial market through a public offering, where they are sold to investors before later trading in the…
Correct answer: public offering519. The coupon payment accrued between last payment and settlement date is classified as __________?
- A. paid interest
- B. unpaid interest
- C. zero interest
- D. accrued interest
Explanation: Coupon interest earned from the last payment date up to the settlement date is called accrued interest.
Correct answer: accrued interest- A. bond covenants
- B. private covenants
- C. federal covenants
- D. expansion covenants
Explanation: Bond covenants are the contractual rules that specify the rights, duties, restrictions, and conditions applying to both bond issuers and…
Correct answer: bond covenants