ACC501 Midterm Preparation File

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Choose the Most Appropriate Answer among the given choices.

Q1. The difference between the return on a risky investment and that on a risk- free investment.

1. Risk Return
2. Risk Premium (Correct)
3. Risk Factor
4. None of the above

Q5. The objective for using the concept of Diversification is to :

1. Minimize the Risk
2. Maximize the return
3. A & B (Correct)
4. None of the Above

Q6. While studying the relationship in risk and return, It is commonly known that:

1. Higher the risk, lower the return
2. Lower the risk, higher the return
3. Higher the risk, higher the return (Correct)
4. None of the above

MCQ # 08 – 10 are based on the following data: Suppose you bought 1,500 shares of a corporation at Rs. 25 each. After a year, you received Rs. 3000 (Rs. 2 per share) in dividends. At the end of year the stock sells for Rs. 30 each. If you sell the stock at the end of the year, your total cash inflow will be Rs. 48,000 (1500 shares 30 each = Rs. 45000 & Dividend = 3000). According to the given data, the Capital Gain will be: A. 10,500 B. 7,500 1500*5(gain per share)= 7500 (Correct) C. 10,000 D. 7,000

According to the given data, the Dividend yield will be: A. 8.50 % B. 6.25% C. 8.00% 1500*25=37500/3000=0.088% (Correct) D. 6.67% According to the given data, Total Percentage Returns will be: A. 20% B. 28% (48000-37500)/37500 = 0.2828% (Correct) C. 32% D. 35%

Q1. Which one of the given options involves the sale of new securities from the issuing company to general public?

1. Secondary market
2. Primary market page 11 (Correct)
3. Capital market
4. Money market

Q2. In financial statement analysis, shareholders focus will be on the:

1. Liquidity of the firm
2. Long term cash flow of the firm
3. Profitability and long term health of the firm page 31 (Correct)
4. Return on investment

Q3. The statement of cash flows helps users to assess and identify all of the following except:

1. The impact of buying and selling fixed assets.