VU Midterm Past Papers
88 solved midterm past paper MCQs for MGT201 (Financial Management) at Virtual University, each with the correct answer marked. Use them to learn the VU question style and test your recall. An independent study tool — not affiliated with VU.
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Q1. Which of the following has 'Beta' as a measure of risk?
Q2. Assume that the expected returns of the portfolios are the same but their standard deviations are given in the options given below, which of the option represent the most risky portfolio according to standard deviation?
Q3. The objective of financial management is to maximize wealth of?
Q4. At the termination of the project we need to take into account:
Q5. Why companies invest in projects with negative NPV?
Q6. Which of the following is used to assess the financial position of a company?
Q7. Which of the following equation can represent income statement in best way?
Q8. The probability of any one outcome for an event is always stated as a percentage of which of the following?
Q9. Which of the following fluctuations can convert a good investment decision into a bad one?
Q10. Suppose you have Rs. 500 and want to deposit in bank for 10 years at 7% interest rate. According to concept of 'simple interest' what amount of interest you'll receive after 10 years.
Q11. To calculate cash flow from operations, which of the given item is included in the adjustment of Net Income?
Q12. Which of the following is the example of an annuity?
Q13. Which of the following make the calculation of NPV difficult?
Q14. What is the advantage to invest in an asset of longer life?
Q15. Which of the following value keeps on moving and changing on daily basis?
Q16. What will be coupon receipt if coupon is paid annually.
Q17. What will be current yield, if a company issued a bond of Rs. 1,000 that is currently trading for Rs. 975 and coupon rate was 7%?
Q18. There is inverse relationship between bond price and ;
Q19. Which of the following security is NOT known as a direct claim security?
Q20. How stock price will be affected if 'There is increase in the dividend growth rate and all else remains same'?
Q21. A company paid dividend recently of Rs. 1.75 and expected to grow at a constant rate of 5% a year into indefinite future. An appropriate required rate of return on the stock is 10%. What would be the expected dividend per share for the next year?
Q22. Which of the following are necessary to keep to consideration while analyzing any investment?
Q23. Who determines the market price of a share of common stock?
Q24. In finance we refer to the market where existing securities are bought and sold as the market.
Q25. ABC's and XYZ's debt-to-total assets ratio is 0.4. What is its debt-to-equity ratio?
Q26. The basic capital budgeting principles involved in determining relevant after-tax incremental operating cash flows require us to —
Q27. A capital budgeting technique through which discount rate equates the present value of the future net cash flows from an investment project with the project’s initial cash outflow is known as: —
Q28. What type of long-term financing most likely has the following features: 1) it has an infinite life, 2) it pays dividends, and 3) its cash flows are expected to be a constant annuity stream? —
Q29. Which of the following risk can be diversified away? -
Q30. Which of the following has NO effect when the financial health (cash flows and income) of the company changes with time? -
Q31. Which of the following is NOT a major cause of systematic risk. —
Q32. Which of the following need to be excluded while we calculate the incremental cash flows? =
Q33. Which of the following is the other name of ordinary annuity? -
Q34. About 100% of diversified risk and 50% of total risk can be removed by diversification across how many stocks? -
Q35. Which of the given ratio measures the firm’s ability to make contractual interest payments? ~
Q36. Market interest rate < coupon interest rate, it means bond is issued at: =
Q37. Which bond type is the most price sensitive to the changes in required rate of return? —
Q38. Which of the following play important role to determine the price of the bond? —
Q39. Following information is extracted from books of Bin Shafiq Garments; you are required to calculate Earning per share with the help of data given below: Dividend paid to preferred stockholder 30% of Net Income Number of common share outstanding 50,000 shares
Q40. Following information is extracted from books Alpha Corporation Market price of common stock Rs. 50.00 Expected dividend (D1) Rs. 2.45 share Required Rate of return Dividend Yield =
Q41. Which of the given investment will be suitable for Ms Ayesha, if she wants to make risk free investment? ~
Q42. Which of the following statement is not included in a set of financial statements? -
Q43. The process of finding the present value of some future amount is called: -
Q44. Which of the following bond type is least price sensitive to the changes in required rate of return? -
Q45. At the termination of project, which of the following needs to be considered relating to project assets?
Q46. Which of the followings is a legal agreement between bondholders and bond issuers that establishes term of bonds?
Q47. Which of the followings provide practical basis to the capital budgeting because the decisions of capital budgeting are made with limited financial resources in normal situations?
Q48. Analyze which of the following statements is true regarding characteristic(s) of Perpetuity.
Q49. What is the expected return of 'security L' if its coefficient of variation and standard deviation are 1.3 and 20% respectively?
Q50. Which type of long-term financing most likely has the following features: 1) it has an infinite life, 2) it pays dividends, and 3) its cash flows are expected to be a constant annuity stream?
Q51. The major difference between floating bond and zero bond is:
Q52. Which value of the product depends upon the demand and supply of the product?
Q53. Which of the following bonds is based on small denomination with speculative grading (below BB)?
Q54. An annuity due consists of a series of equal payments at the beginning of each period.
Q55. An ______ is a series of fixed payments, which might be over a fixed number of years, or over the lifetime of an individual, or both.
Q56. Which of the following techniques would be used for a project that has non-normal cash flows?
Q57. Why invest in projects with negative NPV because there is a hidden value in each project i.e. an opportunity, which is known as a(n):
Q58. A downward sloping yield curve implies that:
Q59. Which of the following is calculated by summing up the discounted future cash flows?
Q60. Which of the following may be defined as the ratio of the present value of future cash flows to the initial investment?
Q61. The method that tells us the number of years required to recover our initial cash investment based on the project's expected cash flows is:
Q62. ______ is charged by the investor, as compensation, against the risk that the company might go bankrupt.
Q63. If initial cash outflow of the project C is Rs. 800,000 and the sum of project's future cash inflows is Rs. 600,000. What is the Profitability Index of the project C?
Q64. Capital rationing is needed when:
Q65. Which of the following is simply the weighted average of the possible returns, with the weights being the probabilities of occurrence?
Q66. Which one of the followings is type of problem associated with Capital Rationing?
Q67. The statistical measure of the variability of a distribution around its mean is referred to as:
Q68. Incidental cash flow that arises because of the effect of new project on the existing or running business is known as:
Q69. Which one of the following selects the combination of investment proposals that will provide the greatest increase in the value of the firm within the budget ceiling constraint?
Q70. Coefficient of variation is NOT the measure of:
Q71. For most firms, P/E ratios and risk:
Q72. ______ are the costs that have already incurred in the past and cannot be recovered.
Q73. A statistical measure of the variability of a distribution around its mean is referred to as
Q74. bond pays Rs. 180 as coupon payment and traded in market at Rs. 950. What would be Interest Yield of the bond?
Q75. Choose the correct statement regarding the calculations of NPV (Net Present Value)
Q76. Which of the following needs to be excluded while we calculate the incremental cash flows?
Q77. means that you can invest in one of the investment choices and having chosen one you cannot choose another.
Q78. Which of the following statements is TRUE regarding Permanent Accounts?
Q79. Suppose a company has paid Rs. 50,000 a dividend to its shareholders while net income for the year was Rs. 500,000. What is the payout-ratio of the company?
Q80. Companies invest in projects with negative NPV because there is a hidden value in each project i.e. an opportunity, which is known as a/an
Q81. Which of the following is type a Temporary Account?
Q82. implies that the cash flows of the two investments are not linked to each other.
Q83. I value of the product depends upon the demand and supply of the product?
Q84. Which of the following are known as Discretionary Financing?
Q85. main objective of ‘Financial Accounting' is:
Q86. -—- is the expected rate of return for which the bondholder holds the bond until its life
Q87. A bond has 16.9% interest yield and 21.2% Yield to Maturity. What would be Capital Yield of the bond?
Q88. When the zero coupon bond approaches to its maturity, the market value of the bond approaches to which of the following?