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 27 of 49
- A. lesser cost fluctuations
- B. wider price fluctuations
- C. less price fluctuations
- D. wider cost fluctuations
Explanation: Treasury bonds and notes generally have longer maturities than Treasury bills, so their prices react more strongly to changes in interest…
Correct answer: wider price fluctuations- A. annually
- B. semiannually
- C. monthly
- D. quarterly
Explanation: Floating-rate Eurobonds commonly pay interest semiannually, with the coupon reset periodically against a reference interest rate.
Correct answer: semiannually- A. relatively lower
- B. relatively higher
- C. relatively zero
- D. relatively discounted
Explanation: Convertible bonds normally offer investors the additional benefit of converting into shares, so investors accept a lower yield than on…
Correct answer: relatively lower524. The principal value of TIPS is increased or decreased and is based on the measure of __________?
- A. consumer price index
- B. manufacturing price index
- C. auction selling index
- D. inflation payment index
Explanation: Treasury Inflation-Protected Securities adjust their principal according to changes in the Consumer Price Index.
Correct answer: consumer price index- A. return on assets
- B. return on callable bond
- C. return on non-callable bonds
- D. return on equity
Explanation: A callable bond's return is considered in relation to a comparable non-callable bond plus the effect of the issuer's call option.
Correct answer: return on callable bond- A. long term bonds
- B. short term bonds
- C. corporate bonds
- D. Federal Reserve bonds
Explanation: Corporate bonds are debt securities issued by companies, commonly to obtain funds for several years or other long-term purposes.
Correct answer: corporate bonds527. According to marketability feature, the bonds which are attached to stock warrants have ___________?
- A. decreased floatation
- B. increased floatation
- C. increased marketability
- D. decreased marketability
Explanation: A stock warrant gives the bondholder a potential right to buy shares, adding an equity-related benefit to the bond and making it more…
Correct answer: increased marketability528. The call premium is $456 and the face value of the bond is $234 then the call price of bonds is
- A. 1.95
- B. 0.0195
- C. 222
- D. 690
Explanation: A bond's call price equals its face value plus the call premium: $234 + $456 = $690.
Correct answer: 690529. The call premium is $640 and the face value of the bond is $285 then the call price of bonds is
- A. 2.25
- B. 355
- C. 925
- D. 0.0225
Explanation: The call price is found by adding the face value and call premium: $285 + $640 = $925.
Correct answer: 925530. The current selling price of the municipal bonds available to bond holders is used to calculate
- A. yield to income tax
- B. yield to municipal bonds
- C. yield to tax rate
- D. yield to revenue bonds
Explanation: A municipal bond's current selling price is used when determining its market yield, described here as the yield to municipal bonds.
Correct answer: yield to municipal bonds- A. more index inflation
- B. less indexed inflation
- C. less active
- D. more active
Explanation: Municipal bonds generally trade in a less active market than Treasury bonds because their issues are smaller and vary more by locality.
Correct answer: less active532. The financial securities issued by the local and state governments are classified as _________?
- A. municipal bonds
- B. reserve bonds
- C. state bonds
- D. federal bonds
Explanation: Municipal bonds are issued by state and local governments to finance public projects and services.
Correct answer: municipal bonds- A. double B
- B. triple B
- C. triple A
- D. double A
Explanation: AAA, or triple-A, is the highest credit rating and indicates the lowest expected default risk.
Correct answer: triple A- A. LIBOR rate monthly
- B. coupon interest monthly
- C. coupon interest semiannually
- D. coupon interest annually
Explanation: U.S. Treasury notes and bonds normally pay coupon interest twice a year, so the payment frequency is semiannual.
Correct answer: coupon interest semiannually- A. investment banks
- B. commercial banks
- C. euro transfer agencies
- D. currency deposit banks
Explanation: Investment banks arrange and distribute Eurobond issues in the primary market, often through an underwriting syndicate.
Correct answer: investment banks- A. local tax and revenue
- B. global tax and revenue
- C. print notes
- D. commercial notes
Explanation: Municipal bonds are repaid from local taxes and revenues, depending on whether they are general-obligation or revenue bonds.
Correct answer: local tax and revenue- A. premium bid auction
- B. discount bid auction
- C. multiple bid auction
- D. One bid auction
Explanation: TIPS are issued through a single-price, or uniform-price, auction, in which successful bidders pay the same accepted price.
Correct answer: One bid auction- A. origination services
- B. document collection services
- C. advising services
- D. both a and c
Explanation: In a negotiated sale, the investment bank commonly helps originate the issue and advises the municipality on pricing and terms.
Correct answer: both a and c- A. triple B rating bonds
- B. double B
- C. triple A
- D. double A
Explanation: BBB is the lowest investment-grade rating in the major rating systems, while BB is below investment grade.
Correct answer: triple B rating bonds- A. call premium
- B. call provision
- C. discount premium
- D. discount provision
Explanation: When a callable bond is redeemed above its face value, the excess of the call price over face value is the call premium.
Correct answer: call premium