Finance- Practice Test Paper- SET 1
1. Calculate the present value of Rs 10000 received at the end of five years. Assume a 5
per cent time preference rate ( )
a)
784
b)
952
c)
907
d)
864
2. Budgeting is tool for ( )
a)
Forecasting
b)
Decision Making
c)
Planning & Control
d)
Investment
3. The process of determining present value is also known as ( )
a)
Compounding
b)
NPV
c)
Discounting
d)
IRR
4. Unsystematic risk is also known as ( )
a)
Systematic
b)
Market risk
c)
Unique risk
d)
Inflation Risk
5. The required rate of return on a company’s security is equal to ( )
a)
Risk plus return
b)
Risk free rate plus risk Premium
c)
Expected return plus risk premium
d)
None of these
6. A Company has preferred stock that pays a Rs 13 dividend per share and sells for Rs100
per share in the market. The flotation (or underwriting) cost is 3 per cent, or Rs 3 per
share. Then the cost of preferred stock is: ( )
a)
13%
b)
13.5%
c)
14%
d)
13.4%
7. Which of the following is not a method for adjusting for risk in capital budgeting? ( )
a)
Risk-adjusted rate
b)
Simulation
c)
Certainty equivalent
d)
Break-even analysis
8. Shares that have been sold to the public are called ( )
a)
Treasury stock
b)
Bonus stock
c)
Sweat equity
d)
None of above
9. When the market price is below the strike price, the call option is said to be ( )
a)
In-the- money
b)
out-of-the-money
c)
at- the-money
d)
None of above
10. Reliance Company has had the following returns over the past five years: 15 %, -5 %, -3
%, 18 % & 17 %. Determine the geometric mean rate of return for the reliance company
stock over the past five years ( )
a)
5.93
b)
6.09 %
c)
7.05 %
d)
7.91 %
11. Overpriced assets can reach their equilibrium return by ( )
a)
Having their expected rate of return reduced
b)
Having their expected rate of return increased
c)
Having their price increased
d)
Both B & C
12. Bid-ask spread in foreign exchange market is the ( )
a)
Price of currency in foreign exchange market
b)
Difference between bid and ask quotes for a currency
c)
Price at which a bank will buy a currency
d)
Price a bank will pay for a currency
13. If Rose corporation has credit sales of Rs 30,00,000 per year and a collection period of
40 days. What is its level of accounts receivable? Assume a 360 day year ( )
a)
Rs 3, 33,333
b)
Rs 3, 55,555
c)
Rs 3, 66,666
d)
Rs 3, 88,888
14. The price and output combination at which total profit is maximized at the point ( )
a)
Average Cost = Average Revenue
b)
Marginal Cost = Marginal Revenue
c)
Total Cost = Total Revenue
d)
None of the above
15. The market demand function for a product is express the relation between ( )
a)
Price and supply
b)
Quantity demand and its factors
c)
Price and Cost
d)
Cost and Demand
16. The supply function specifies the relation between ( )
a)
The quantity supplied and all variables that determine supply
b)
The price and all variables of production that determine supply
c)
The quantity demanded and all variables that determine supply
d)
None of above
17. Characterize each of the following pairs of goods and/or services in terms of their crossprice elasticity of demand ( )
a)
Tea and Coffee complements
b)
Fuel and Four wheeler Complements
c)
Fuel and two wheeler substitutes
d)
Bank and Postal deposits complements
18. If there were four girls out of five people then the number of orderings or combinations
would be ( )
a)
216
b)
156
c)
5
d)
20
19. Find the probability of exactly 30 students passing, plus the probability of 31 passing,
plus the probability of 32 passing, etc., up to the probability of 40 passing (the fact that
the events are mutually exclusive allows this). The probability of 30 passing is ( )
a)
0.020
b)
0.030
c)
0.50
d)
1.0
20. The t distribution is in many ways similar to the standard Normal, except this one. ( )
a)
Symmetric
b)
Centered on zero
c)
Bell-shaped
d)
Asymmetric
21. The combination of Price , Product, Promotion and place in known as ( )
a)
Product mix
b)
Promotion mix
c)
Pricing mix
d)
Marketing mix
22. A company needs to understand its rivals in the market, it has to study ( )
a)
Economic environment
b)
Political environment
c)
Cultural environment
d)
Competitors analysis
23. Strategic intent "envisions a desired leadership position and establishes the criterion
the organization will use to chart its progress" proposed by ( )
a)
Michael E Porter
b)
Gary Hamel and CK Prahalad
c)
Adam Smith
d)
Peter F Drucker
24. As per BCG matrix a company business that operate in a high-growth market but have
low relative market share occupies which quadrant of matrix ( )
a)
Stars
b)
Cash cows
c)
Question mark
d)
Dogs
25. Queuing theory serves as the best tool for improving quality of service for serving
customers at ( )
a)
Manufacturing process
b)
Banking services
c)
Quality of production
d)
None of the above