STRATEGIC FINANCIAL MANAGEMENT MCQ With Answers – Multiple Choice Question – STRATEGIC FINANCIAL MANAGEMENT MCQ With Answers

• A project had an equity beta of 1.3 and was going to be financed by a combination of 30% debt and 70% equity. Assuming debt-beta to be zero, the project beta is :
  • 0.81
  • 0.71
  • 0.51
  • 0.91

• An investor buys a call option contract for a premium of ₹150. The exercise price is ₹15 and the current market price of the share is ₹12. If the share price after three months reaches ₹20, what is the profit made by the option holder on exercising the option? Contract is for 100 shares. Ignore the transaction charges.
  • ₹450
  • ₹350
  • ₹375
  • ₹475

• Mr. X can earn a return of 18% by investing in equity shares on his own. Now he is considering recently announced equity based mutual fund scheme in which initial expenses are 6.70% and annual recurring expenses are 1.7%. How much should the mutual fund earn to provide Mr. X a return of 18 per cent?
  • 22
  • 19
  • 24
  • 21

• CNX Nifty is currently quoting at 9100. Each lot is 75. An investor purchases a May Futures contract at 9200. He has been asked to pay 5% margin. What amount of initial margin is he required to deposit? To what level NIFTY futures should in increase to get a gain of 4%?
  • 9318.4
  • 9218.4
  • 9218.5
  • 9118.4

• P Ltd. has an EPS of ₹75 per share. Its Dividend Payout Ratio is 30%. Earnings and dividends of the company are expected to grow at 6% per annum. Find out the cost of equity capital if its market price is ₹300 per share.
  • 11.5%
  • 12.5%
  • 13.5%.
  • 14.5%

• An investor has three alternatives of varying investment values. The data available for each of these alternatives are given below:

Alternative	Expected Return (%)	Standard Deviation of Return
I II III	23 20 18	8.00 9.50 5.00

• Which alternative would be the best if coefficient of variation is used?
  • Alternative III is the best as its co-efficient of variation is the lowest
  • Alternative II is the best as its co-efficient of variation is the lowest
  • Alternative I is the best as its co-efficient of variation is the lowest
  • None

STRATEGIC FINANCIAL MANAGEMENT MCQ With Answers

• A student ordered a book from USA on 01-05-2018 for $ 90, when the spot rate was ₹68.50/$. Payment was made ten days later, on 11-05-2018 when the book was delivered. By this time, the rupee had appreciated by 10%. How much did it cost the student in Rupees? (Ignore transaction and delivery cost).
  • ₹5304.55
  • ₹5404.55
  • ₹5504.55
  • ₹5604.55

• You are a forex dealer in India. Rates of rupee and pound in the international market are US $0.01386952 and US $1.3181401 respectively. What will be your direct quote of £ (pound) to your customer.
  • ₹54.6987
  • ₹71.1408
  • ₹95.0386
  • ₹0.0105

• ‘Bank rate’ published by the Reserve Bank refers to
  • the repo rate transacted by RBI
  • the rate at which housing or other long term loans shall be sanctioned by scheduled banks to their customers
  • The rate at which RBI is willing to buy or rediscount bills of exchange or other commercial paper
  • the rate which RBI uses as cut-off for auction of Government securities

• An investor has invested in a mutual fund when the NAV was ₹15.50 per unit. After 90 days the NAV was ₹14.45 per unit. During the period the investor got a cash dividend of ₹1.35 per unit and capital gain distribution of Re. 0.20. The annualized return based on 360 days year count will be
  • 3.23%
  • 12.92%
  • 0.8075%
  • 16.45%

• Initial investment of a project is ₹25 lakh. Expected annual cash flows are ₹6.5 lakh for 10 years Cost of capital is 15%. The annuity factor for 15% for 10 years is 5.019. The Profitability Index of the project will be
  • 1.305
  • 3.846
  • 0.26
  • 0.7663

• Rate of inflation = 5.1%, β = 0.85, Risk premium = 2.295%, Market return = 12%. The real rate of return will be
  • 4.2%
  • 11.70%
  • 6%
  • 5.95%

• In a constant dividend model, the following estimates the difference between the required rate of return and the growth rate:
  • Earnings Retention ratio
  • Leverage ratio
  • Dividend Pay-out ratio
  • Dividend yield ratio

• Presently, a company’s share price is ₹120. After 6 months, the price will be either ₹ 150 with a probability of 0.8 or ₹110 with a probability of 0.2. A call option exists with an exercise price of ₹130. What will be the expected value of call option at maturity date?
  • ₹20
  • ₹16
  • ₹12
  • ₹10

• An Indian Company is planning to invest in the US. The annual rates of inflation are 8% in India and 3% in USA. If the spot rate is currently ₹60.50/$, what spot rate can you expect after 5 years, assuming the inflation rates will remain the same over 5 years?
  • ₹88.89
  • ₹54.95
  • ₹76.68
  • ₹76.10

• Which of the following securities is most liquid?
  • Money Market instruments
  • Capital Market instruments
  • Gilt-edged securities
  • Index futures

• While plotting a graph with risk on X-axis and expected return on Y-axis, a line drawn with co-ordinates (0, rf) and (β, rm) is called
  • Security Market Line
  • Characteristic Line
  • Capital Market Line
  • CAPM Line

• If the RBI intends to reduce the supply of money as part of anti-inflation policy, it might
  • Lower the bank rate
  • Increase the Cash Reserve Ratio
  • Decrease the SLR
  • Buy Government securities in the open market.

• Which of the following is not an investment constraint?
  • Liquidity
  • The absence of the need for regular income.
  • The preferred time horizon
  • Risk tolerance

• It is given that ₹/£ quote is ₹100.68 – 102.95 and ₹/$ quote is ₹61.86 – 62.87. What would be the $/£ quote? It is given that ₹/£ quote is ₹100.68 – 102.95 and ₹/$ quote is ₹61.86 – 62.87. What would be the $/£ quote?
  • $1.6014-$1.6642(quote)
  • $1.6014-$1.6542(quote)
  • $1.6014-$6352(quote)
  • $1.6014-$6252(quote)

• The theoretical forward price of the following security for 6 months is: Spot Price (Sx) ₹160 Risk free interest rate 9% [Given: e0.045 = 1.046028]
  • ₹166.3645
  • ₹167.4645
  • ₹167.3645
  • ₹166.4656

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