- Type
- Midterm past paper
- Course
- MGT411 Money & Banking
- Size
- PDF 753 KB
- Updated
- 23 Oct 2026
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- Keeping other things constant, price of Zero Coupon bond increases as the interest rate
o O Constant
o O Increases
o ✅ Decreases
o O None of given options
Q2. The return on the bond is equal to which of the following?
o O Current yield - rate of capital gains
o ✅ Current yield + rate of capital gains
o O Coupon rate - rate of capital gains
o O Coupon rate + rate of capital gains
3. An investor is deprived from promised payment due to organization's bankruptcy is an
example of:
o O All of the given options
o O Inflation risk
o O Interest rate risk
o ✅ Default risk
4. An increase in the expected inflation shifts the bond demand to the
o O No change
o ✅ Left
o O All of the given options
- Keeping all other things constant, if inflation is expected to increase in future bond supply
curve shifts to:
o O Left
o O Downward
o ✅ Right
6. B to D grade bonds fall in the category of:
o O Long term speculative grade bonds
o O Short term investment grade bonds
o O Long term investment grade bonds
o ✅ Short term speculative grade bonds
Q7. Which of the following best describes the relationship between Bond prices and yields?
o ✅ Move together inversely
o O Are independent of each other
o O Bond yields do not change since the coupon is fixed
o O Move together directly
- Standard deviations for the projects A, B, C and D have been computed as 15%, 20%, 22% and
25% respectively. Which of the following would be the best project keeping risk factor into
consideration?
o O Project B - 20%
o O Project D - 25%
o ✅ Project A - 15%
o O Project C - 22%
9. The relationship between the price and the interest rate for a zero coupon bond is
o O Non-existent
o ✅ Volatile
o O Stable
Q10. The risk premium for an investment:
✅ Increases with risk O Is a fixed amount added to the risk free return
O Is negative for U.S. Treasury Securities
- Question: The working and activities of the banking sector are regulated by:
o Securities and Exchange Commission of Pakistan
o Board of Investment
o
State Bank of Pakistan ✅
o Securities firms
- Question: Which of the following financial institutions does not fall in the category of securities
firms?
o Brokers
o
Commercial bank ✅
o Mutual fund companies
o Investment bank
- Question: Coupon bonds make the annual payments which are called as:
o Annual payments
o Fixed payments
o
Coupon payments ✅
o Maturity payment
- Question: Borrowers want to borrow --------~ whereas lenders favor --------:
o Large-size loans, Small-size loans
o Short-term loans, Long-term loans
o
Long-term loans, short-term loans ✅
o Small-size loans, large-size loans
- Question: If a bond sells at a premium, where the price exceeds face value, then we would
expect to see:
o
o
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