MGT411 Quiz 1

Q1. If bond price is higher than Face value, which of the following expression is true?

1. Coupon Rate <Current Yield > Yield to Maturity
2. Coupon Rate > Current Yield > Yield to Maturity
3. Coupon Rate < Current Yield < Yield to Maturity
4. Coupon Rate = Current Yield = Yield to Maturity

Correct answer: Coupon Rate > Current Yield > Yield to Maturity

Q2. All of the following are the advantages of financial intermediaries Except

1. Risk aversion
2. Payment facilitation
3. Reduce cost
4. Channel fund from saver to borrower

Correct answer: Risk aversion

Q3. Current yield only measures return of bond solely arises from-----------.

1. Capital gain
2. Coupon payment
3. Dividend
4. Market gain

Correct answer: Coupon payment

Q4. Which characteristic of money is not included in securities characteristics?

1. Unit of account
2. Mean of payment
3. Store of value
4. Transfer of risk

Correct answer: Mean of payment

Q5. If the bond price is more than its face value, what will be the relationship among current yield, coupon rate and YTM?

1. Coupon Rate = Current Yield = Yield to Maturity
2. Yield to maturity < current yield < coupon rate
3. Current yield < coupon rate < Yield to Maturity
4. Coupon Rate > Current Yield < Yield to Maturity

Correct answer: Yield to maturity < current yield < coupon rate

Q6. Present value (PV) of bonds is determined by methodology of -----------

1. Profitability index
2. Discounting
3. Compounding
4. Future value

Correct answer: Discounting

Q7. Which of the following expression is true regarding Consumer Price Index (CPI)?

1. Cost of basket in that period X Cost of basket in base period *100
2. Cost of basket in that period + Cost of basket in base period *100
3. Cost of basket in that period / cost of basket in base period *100
4. Cost of basket in base period / Cost of basket in that period *100

Correct answer: Cost of basket in that period / cost of basket in base period *100

Q8. Future value (FV) exceeds present value (PV) owing to the concept of -----------.

1. Information is vital for decisions
2. Risk require compensation
3. Future has more risk
4. Time has value

Correct answer: Time has value

Q9. If volatility in the market increases what will be the effect on the risk?

1. Risk may increase or decrease
2. Risk will decrease
3. Risk will increase
4. Risk will remain constant

Correct answer: Risk will increase

Q10. The range of probability must be from -------- to ---------------.

1. 0,100
2. 0, 1
3. 0.5, 1
4. -1, 1

Correct answer: 0, 1