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MIDTERM EXAMINATION MGT411- Money & Banking

Question No: 1 ( Marks: 1 ) - Please choose one

Wider the range of outcomes wider will be the ___________.

Risk

Cost

Probability

Loss

Question No: 2 ( Marks: 1 ) - Please choose one

Which of the following statement is true?

Increasing the FV by any percentage will change the PV by same percentage in opposite direction

Increasing the FV by any percentage will change the PV by same percentage in same direction

Increasing the FV by any percentage will not change the PV by any percentage

None of the given options

Question No: 3 ( Marks: 1 ) - Please choose one

A change in the interest rate:

Has a larger impact on the present value of a payment to be made far into the future than one to be made sooner

Will not have a difference on the present value of two equal payments to be made at different times

Has a smaller impact on the present value of a payment to be made far into the future than one to be made sooner

None of the given options

Question No: 4 ( Marks: 1 ) - Please choose one

The interest rate used in the present value calculation is often referred as:

Discount rate

Inflation rate

Nominal rate

Deflation rate

Question No: 5 ( Marks: 1 ) - Please choose one

__________ pool money from individuals and invest in differ net portfolio and return is distributed in different share holders.

Mutual funds

Investment banks

Brokers

Finance companies

Question No: 6 ( Marks: 1 ) - Please choose one

Which of the following institution takes direct deposit from customer and gives loan to customer directly?

Zarai Tarkaytee Bank LTD

Soneri Bank

Khushali Bank

Credit union

Question No: 7 ( Marks: 1 ) - Please choose one

The statement "risk requires compensation" implies:

People always accept risk

People will only accept risk when they are rewarded for doing so

People do not take risk

People will pay to avoid risk

Question No: 8 ( Marks: 1 ) - Please choose one

Financial instruments are used to transfer which of the following?

Both Risk and Resources

Risk

Resources

Mortgages

Question No: 9 ( Marks: 1 ) - Please choose one

The Dividend-Discount Model of stock valuation:

Takes the annual dividend, adds it to the expected future selling price and divides by the number of years to get the current price

Takes the net present value of expected dividends and add it to the future sale price of the stock

Takes the net present value of the expected future price of the stock and add the annual dividend

Is an application of the net present value formula

Question No: 10 ( Marks: 1 ) - Please choose one

You start with a $1000 portfolio; it loses 40% over the next year, the following year it gains 50% in value; At the end of two years the worth of your portfolio will be:

$900

$600

$1000

$1100

Question No: 11 ( Marks: 1 ) - Please choose one

The risk premium of a bond will:

Higher for investment-grade bonds than for high-yield bonds

Positive but small if the risk of default is zero

Decrease when the default risk rises

Increase when the risk of default rises

Question No: 12 ( Marks: 1 ) - Please choose one

Term structure of interest rate can be explained by which one of the following?

Tax difference

Expectation hypothesis

Liquidity premium theory

Both by expectation hypothesis and liquidity premium theory

Question No: 13 ( Marks: 1 ) - Please choose one

A graph in which time to maturity is along x-axis and yield to maturity is along y-axis is called __________.

Government curve

SWAP curve

Yield curve

LIBOR curve

Question No: 14 ( Marks: 1 ) - Please choose one

Which of the following statement is true about two bonds having same default rate and tax status but different maturity dates?

It creates no effect on yield of bonds

Both of them have different yield

Liquidity risk factor should be taken into consideration

It is impossible that default risk and tax status of two bonds are same

Question No: 15 ( Marks: 1 ) - Please choose one

If the tax rate is higher than gap between yield on taxable and tax exempt bond?

Shorter

Wider

No gap

Any thing can be possible

Question No: 16 ( Marks: 1 ) - Please choose one

Which of the following ratings shows “Highest quality and credit worthiness”?

AAA

AA

BB

A

Question No: 17 ( Marks: 1 ) - Please choose one

Which of the following best describes default risk?

The chance the issuer will be unable to make interest payments or repay principal

The chance the issuer will retire the debt early

The chance the issuing firm will be sold to another firm

The chance the issuer will sell more debt

Question No: 18 ( Marks: 1 ) - Please choose one

In which of the following bonds we may ignore the default risk?

Privately issued bonds

Government issued bonds

Bonds issued by Corporate

All of the given options

Question No: 19 ( Marks: 1 ) - Please choose one

A business cycle downturn shifts the bond supply to the:

Right

Left

No change

None of the given options

Question No: 20 ( Marks: 1 ) - Please choose one

The relationship between the price and the interest rate for a zero coupon bond is best described as _________.

Volatile

Stable

Inverse

No relationship

Question No: 21 ( Marks: 1 ) - Please choose one

The return on holding a bond till its maturity is called:

Coupon rate

Yield to maturity

Current yield

Fixed return

Question No: 22 ( Marks: 1 ) - Please choose one

Treasury bonds & corporate bonds are the examples of__________ bonds.

Zero-coupon bonds

Coupon bonds

Consols

Fixed payment

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