Corporate Finance Questions

Corporate Finance Questions Page-10. The following MCQs are from the theory of Finance, that is Public Finance, Corporate Finance and Personal Finance. View answers to the questions at the bottom of the page.

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  1. The return that is forgone by investing in the project rather than investing in financial markets at the same level of risk is called

    1. internal rate of return
    2. capital saving
    3. opportunity cost
    4. opportunity saving

  2. The party that agrees to buy the underlying asset in a forward contract is said to assumes

    1. forward position
    2. backward position
    3. long position
    4. short position

  3. The party that agrees to sell the underlying asset in a forward contract is said to assumes

    1. forward position
    2. backward position
    3. long position
    4. short position

  4. If the spot price is $1200 and the exercise price is $1000 then the payoff of a party assuming a long position is

    1. -$200
    2. $0
    3. $1
    4. $200

  5. If the spot price is $1200 and the exercise price is $1000 then the payoff of a party assuming a short position is

    1. -$200
    2. $0
    3. $1
    4. $200

  6. If the covariance between stock A and market returns is 12, and the standard deviation of market returns is 3 then what is the value of beta?

    1. 0.96
    2. 1.0
    3. 1.33
    4. 1.45

  7. Difference between strike price and stock price is called
    1. intrinsic value
    2. option premium
    3. time premium
    4. none of these

  8. Option value at expiration is a function of
    1. interest rate
    2. volatility
    3. stock price
    4. exercise price
    1. I only
    2. III only
    3. I and II
    4. III and IV

  9. If market price of the share at expiration is $100 and exercise price is $80, then value of a call option at expiration is

    1. -$20
    2. $0
    3. $1
    4. $20

  10. If market price of the share at expiration is $100 and exercise price is $80, then value of a put option at expiration is

    1. -$20
    2. $0
    3. $1
    4. $20

ANSWERS: CORPORATE FINANCE QUESTIONS

  1. C
  2. C
  3. D
  4. D
  5. A
  6. C
  7. A
  8. D
  9. D
  10. B