ACC501 Midterm Solved MCQs Set 2

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
3. Risk Factor
4. None of the above

Correct answer: Risk Premium

Q2. A group of assets such as stocks and bonds held by an investor.

1. Portfolio
2. Capital Structure
3. Budget
4. None of the above

Correct answer: Portfolio

Q3. If the variance or standard deviation is larger then the spread in returns will be:

1. Less
2. More
3. Same
4. None of the Above

Correct answer: More

Q4. The following risk is entirely wiped out by Diversification.

1. Systematic Risk
2. Unsystematic Risk
3. Portfolio Risk
4. Total Risk

Correct answer: Unsystematic Risk

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

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

Correct answer: A & B

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
4. None of the above

Correct answer: Higher the risk, higher the return

Q7. This type of risk affects almost all types of assets.

1. Systematic Risk
2. Unsystematic Risk
3. Total Risk
4. Portfolio Risk

Correct answer: Systematic Risk

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).

Q8. According to the given data, the Capital Gain will be:

1. 10,500
2. 7,500
3. 10,000
4. 7,000

Correct answer: 7,500

Q9. According to the given data, the Dividend yield will be:

1. 8.50 %
2. 6.25%
3. 8.00%
4. 6.67%

Correct answer: 8.00%

Q10. According to the given data, Total Percentage Returns will be:

1. 20%
2. 28%
3. 32%
4. 35%

Correct answer: 28%

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
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
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.
2. The company's ability to pay debts, interest and dividends.
3. A company's need for external financing.
4. The company's reliance on capital leases.

Q4. Suppose Younas Corporation has balance of merchandise of 5000 units. It wants to sell 2000 units at 90% of its cost on cash. What would be the affect of this transaction on the current ratio?

1. Fall
2. Rise
3. Remain unchanged
4. None of the given option

Q5. If the interest rate is 18% compounded quarterly, what would be the 8-year discount factor?

1. 1.42215
2. 2.75886
3. 3.75886
4. 4.08998

Q6. You have a cash of Rs.150, 000. If a bank offers four different compounding methods for interest, which method would you choose to maximize the value of your Rs.150, 000?

1. Compounded daily
2. Compounded quarterly
3. Compounded semiannually
4. Compounded annually