Free Business Finance MCQs with Answers

• A. Shorter call option
• B. Longer call option
• C. Longer put option
• D. Shorter put option

Explanation: The time value of an option generally increases when more time remains before expiration, because there is a greater chance of a…

• A. Option lattice
• B. Pricing movement
• C. Price change
• D. Binomial lattice

Explanation: A binomial lattice represents possible upward and downward movements in the underlying asset price over successive periods and uses them…

• A. Savings associations
• B. Loans associations
• C. Preferred and common associations
• D. Savings and loans associations

Explanation: Savings and loan associations accept deposits from individual savers and provide loans, especially for residential and commercial real…

• A. Debit unions
• B. Life insurance companies
• C. Credit unions
• D. Auto purchases

Explanation: Life insurance companies collect premiums, invest those funds in securities such as bonds, and pay beneficiaries when insured events…

• A. Financial services corporations
• B. Common service corporations
• C. Preferred service corporations
• D. Commercial service corporations

Explanation: Citigroup, American Express, and Fidelity provide financial products and services such as banking, payments, investments, and asset…

• A. International firm of auction system
• B. International association of network dealers
• C. National firm of equity dealers
• D. National association of securities dealers

Explanation: The National Association of Securities Dealers, or NASD, historically regulated broker-dealers and supervised securities trading in the…

• A. Exchange traded fund
• B. Management expense
• C. Money trade fund
• D. Capital trade fund

Explanation: An exchange-traded fund can be bought or sold throughout normal exchange trading hours, unlike a traditional mutual fund, which is priced…

• A. Hiring problems
• B. Agency problems
• C. Corporation internal problems
• D. Corporation external problems

Explanation: When hired agents act for the owners in an IPO or corporation, their interests may differ from those of the owners, creating an agency…

• A. Budget surplus
• B. Budget deficit
• C. Federal reserve
• D. Federal budget

Explanation: A budget surplus occurs when government tax revenues and other receipts exceed government spending.

• A. U.S treasury bonds
• B. Mortgages
• C. Municipal bonds
• D. Corporate bonds

Explanation: Municipal bonds are issued by states and local governments and often receive tax advantages, particularly exemption from federal income…

• A. Unlimited liability partnership
• B. Limited liability partnership
• C. Controlled partnership
• D. Uncontrolled partnership

Explanation: In a limited liability partnership, each partner's personal liability for the firm's debts is generally limited, subject to exceptions…

• A. Residential markets
• B. Mortgage markets
• C. Agriculture markets
• D. Commercial markets

Explanation: Mortgage markets deal in loans secured by real estate, including residential, commercial, industrial, and agricultural property.

• A. Municipal bonds
• B. Corporate bonds
• C. U.S treasury bonds
• D. Mortgages

Explanation: A mortgage is a loan secured by specific property, which the lender may claim if the borrower defaults.

• A. Saving intermediaries
• B. Discounted intermediaries
• C. Money market securities
• D. Capital market securities

Explanation: Money market securities are short-term instruments that mature in one year or less, such as Treasury bills and commercial paper.

• A. Intermediate term
• B. Capital term
• C. Short-term
• D. Long-term

Explanation: Financial instruments with maturities exceeding five years are generally classified as long-term instruments.

• A. Average cost of capital
• B. Mean cost of capital
• C. Weighted cost of capital
• D. Weighted average cost of capital

Explanation: The weighted average cost of capital combines the required returns on debt and equity according to their proportions in the firm's…

• A. Debit funds
• B. Credit funds
• C. Mutual funds
• D. Insurance funds

Explanation: Mutual funds pool money collected from savers and use it to purchase diversified financial instruments.

• A. Financial markets
• B. Corporate institutions
• C. Hedge firms
• D. Retirement planners

Explanation: Financial markets connect units with surplus funds, such as savers, to units needing funds, such as businesses and governments.

• A. Venture partners
• B. Corporate partners
• C. Limited partners
• D. General partners

Explanation: Limited partners are liable only up to the amount they invest, provided they do not take on the management role of general partners.

• A. Initial public offering
• B. External public offering
• C. Internal public offering
• D. Unprofessional offering

Explanation: An initial public offering is the first sale of a company's shares to the general public, providing equity financing.