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FINALTERM EXAMINATION
Fall 2008
ACC501- Business Finance (Session - 1)
Marks: 81
Question No: 1 ( Marks: 1 ) - Please choose one
Which of the following is the difference between current assets and current liabilities?
Surplus Asset
Short-term Ratio Working Capital
Current Ratio
Income Statement Balance Sheet
Cash Flow Statement
Retained Earning Statement
be:
Rs. 107,000
Rs. 104,000
Rs. 101,000
Rs. 93,000
M.B.A(3.5 Year)
4th Semester
Virtual University of Pakistan Sialkot Campus(Pskt01) http://www.facebook.com/todaypost
100,000 + 4000(inflow) – 3000(outflow)
•We had sales of $500, while accounts receivable rose by $30 over the year, so cash inflow is $500 – 30 = $470
Question No: 4 ( Marks: 1 ) - Please choose one
Which of the following statement is the best representative of vertical analysis?
Vertical analysis in the income statement causes all accounts to be related as a percentage of net income.
Vertical analysis in the balance sheet causes all accounts to be related as a percentage of total assets.
Percentages used in vertical analysis make identifying trends difficult.
Percentages can be used in the balance sheet without being associated with the numbers they represent.
http://answers.yahoo.com/question/index?qid=20100804021544AABSZrZ
Question No: 5 ( Marks: 1 ) - Please choose one
Kamran just won a lottery and want to put some money away so that he will have Rs. 75,0 00 for his Childs school education 18 year s from now. He can earn 7. 5 percent compounded annually. How much does he need to invest today?
Rs. 15,763
Rs. 17,271
Rs. 18,980
Rs. 20,404
Use Present Value formula = PV = FV / (1+r)^t
Question No: 6 ( Marks: 1 ) - Please choose one
You need Rs. 2,000 to buy a new DVD player for your car. If you have R s. 800 to invest at 5 percent compounded annually, how long will you have to wait to buy the DVD player?
8.42 years
14.58 years
15.75 years
18.78 years p59
Number of periods = natural log [(FV * i) / (PV * i)] / natural log (1 + i)
Question No: 7 ( Marks: 1 ) - Please choose one
How much must be deposited at 15% each of the next 7 years to have Rs. 4,565?
Rs. 452.75
Rs. 570.50
Rs. 350.20
Rs. 412.50
4565= C * [(1+0.15)^7 – 1]/0.15
Solve for C
Question No: 8 ( Marks: 1 ) - Please choose one
What amount a borrower would pay at the end of second year with a 4 -year, 12%, interest- only loan of Rs. 3,000?
Rs. 360
Rs. 2,000
Rs. 3,000
Rs. 3,360 p69
Interest-Only Loans
•Calls for the borrower to pay interest each period and to repay the entire principal at some time in the future.
•With a 3-year, 10%, interest-only loan of $1,000, the borrower would pay $1,000 x 0.10 = $100 in interest at the end of first and second years,
•At the end of third year, he would return $1000 plus the $100 in interest for that year.
Question No: 9 ( Marks: 1 ) - Please choose one
Which of the following is the expected rate of return on a bond if bought at its current market price and held to maturity?
Current Yield Yield To Maturity Coupon Yield
Capital Gains Yield
Question No: 10 ( Marks: 1 ) - Please choose one
The price of a R s.1, 000 -face value bond is Rs.1, 000. What will be the yield to maturity if there is a coupon payment of Rs. 80 for 6 years?
Greater than 8% p77
Lower than 8%
Equal to 8%
Cannot be determined without more information
Bond value = C x [1 - 1/ (1 + r)t]/r + F/(1 + r)t
Where: C = the promised coupon payment
F = the promised face value
t = number of periods until the bond matures
r = the market’s required return, YTM
Question No: 11 ( Marks: 1 ) - Please choose one
Which of the following short- term rating by PACRA denotes an in adequate capacity to ensure timely repayment?
A
B
C
D
Question No: 12 ( Marks: 1 ) - Please choose one
Which one of the following statements is INCORRECT regarding zero coupon bonds?
Zero coupon bonds pay no interest at all.
Zero coupon bonds are offered at a price that is much lower than its stated value.
The issuer of a zero coupon bond deducts interest every year because interest is actually paid every year.
The issuer of a zero coupon bond deducts interest every year even though interest is not actually paid every year.
Question No: 13 ( Marks: 1 ) - Please choose one
An investment should be accepted if the net present value is __________ and rejected if it is ________.
Positive; positive Positive; negative p105
Negative; negative
Negative; positive
Question No: 14 ( Marks: 1 ) - Please choose one
An investment is acceptable if its calculated payback period is _________ than/to some specified number of years.
More Less p105
Equal
None of the given options
“An investment is acceptable if its calculated payback period is less than some specified
number of years.”
Question No: 15 ( Marks: 1 ) - Please choose one
The rate at which NPV equals to zero is called :
Average Accounting Return (AAR)
Internal Rate of Return (IRR)
Required Rate of Return (RRR)
Weighted Average Cost of Capital (WACC)
Question No: 16 ( Marks: 1 ) - Please choose one
A project whose acceptance prevents the acceptance of one or more alternative projects is referred to as:
A mutually exclusive project
An independent project
A dependent project
A contingent project
http://wps.pearsoned.co.uk/ema_uk_he_wachowicz_fundfinman_12/26/6680/1710103.cw/content/index.html
Q#20
Question No: 17 ( Marks: 1 ) - Please choose one
___________ Cost is an outlay that has already occurred and hence is not affected by the decision under consideration.
Sunk
Opportunity
Fixed
Variable
Question No: 18 ( Marks: 1 ) - Please choose one
___________ Cost refers to the cash flows that could be generated from an asset the firm already owns provided it is not used for the project in question.
Sunk
Opportunity
Fixed
Variable
Question No: 19 ( Marks: 1 ) - Please choose one
If two projects are _______________, the fact that they have unequal lives will not affect the analysis.
Mutually exclusive
Dependent Independent
Correlated
http://www.docstoc.com/docs/8183229/CFA-Quiz-11
Question No: 20 ( Marks: 1 ) - Please choose one
Mr. A, as a financial consultant, has prepared a feasibility report of a project for XYZ Company that the company is planning to undertake. He has suggested that the project is feasible. The consultancy fee paid to Mr. A will be considered as:
Sunk cost p120
Opportunity cost
Both sunk cost and opportunity cost
Neither sunk cost nor opportunity cost
Sunk Costs
•A cost that has already been incurred and cannot be recouped and therefore should not be considered in an investment decision
•e.g. a consultant’s fee for evaluating the option of launching a new product
Question No: 21 ( Marks: 1 ) - Please choose one
Which one of the following is TRUE about the difference between debt and common stock?
Debt is ownership but equity is not
Creditors have voting power while stockholders do not
Interest payments are promised while dividend payments are not Both stockholders and bondholders have voting privileges
http://highered.mcgraw-hill.com/sites/0073405132/student_view0/chapter7/chapter_quiz.html Q#9
Question No: 22 ( Marks: 1 ) - Please choose one
Which one of the following typically applies to preferred stock but not to common stock?
Dividend yield
Cumulative dividends
Voting rights
Tax deductible dividends http://odin.lcb.uoregon.edu/aemami/318Practice/PRACTICE%207/Chpt07.htm?As4=1&Rf1=&Rf1=&Rf1=&Rf
1=&Rf1=&Rf1=&Rf1=&Rf1=&TA99=&TA100=&TA101=&TA102=&TA103=&TA104=&TA105=&TA106=
&TA107= Q#4
Question No: 23 ( Marks: 1 ) - Please choose one
Which of the following statement is INCORRECT regarding Average Accounting Return?
AAR is a rate that makes the NPV equal to zero p119
AAR is a measure of accounting profit relative to book value
An investment is acceptable if its AAR is greater than a benchmark AAR None of the given options
•Average Accounting Return
•AAR is a measure of accounting profit relative to book value
•AAR rule is to take an investment if its AAR exceeds a benchmark AAR
Question No: 24 ( Marks: 1 ) - Please choose one
According to 2 M&M proposition, cost of equity does NOT depend upon which of the following?
The required return of firm s assets
The firm s cost of debt
The firm’s stockholders p153
The firm’s debt-equity ratio
•This 2nd proposition tells us that the cost of equity depends on three things
•The required return on firm’s assets RA
•The firm’s cost of debt RD, and
•The firm’s debt-equity ratio D/E
DOWNLOAD
FINALTERM EXAMINATION
Fall 2008
ACC501- Business Finance (Session - 1)
Marks: 81
Question No: 1 ( Marks: 1 ) - Please choose one
Which of the following is the difference between current assets and current liabilities?
Surplus Asset
Short-term Ratio Working Capital
Current Ratio
Income Statement Balance Sheet
Cash Flow Statement
Retained Earning Statement
be:
Rs. 107,000
Rs. 104,000
Rs. 101,000
Rs. 93,000
M.B.A(3.5 Year)
4th Semester
Virtual University of Pakistan Sialkot Campus(Pskt01) http://www.facebook.com/todaypost
100,000 + 4000(inflow) – 3000(outflow)
•We had sales of $500, while accounts receivable rose by $30 over the year, so cash inflow is $500 – 30 = $470
Question No: 4 ( Marks: 1 ) - Please choose one
Which of the following statement is the best representative of vertical analysis?
Vertical analysis in the income statement causes all accounts to be related as a percentage of net income.
Vertical analysis in the balance sheet causes all accounts to be related as a percentage of total assets.
Percentages used in vertical analysis make identifying trends difficult.
Percentages can be used in the balance sheet without being associated with the numbers they represent.
http://answers.yahoo.com/question/index?qid=20100804021544AABSZrZ
Question No: 5 ( Marks: 1 ) - Please choose one
Kamran just won a lottery and want to put some money away so that he will have Rs. 75,0 00 for his Childs school education 18 year s from now. He can earn 7. 5 percent compounded annually. How much does he need to invest today?
Rs. 15,763
Rs. 17,271
Rs. 18,980
Rs. 20,404
Use Present Value formula = PV = FV / (1+r)^t
Question No: 6 ( Marks: 1 ) - Please choose one
You need Rs. 2,000 to buy a new DVD player for your car. If you have R s. 800 to invest at 5 percent compounded annually, how long will you have to wait to buy the DVD player?
8.42 years
14.58 years
15.75 years
18.78 years p59
Number of periods = natural log [(FV * i) / (PV * i)] / natural log (1 + i)
Question No: 7 ( Marks: 1 ) - Please choose one
How much must be deposited at 15% each of the next 7 years to have Rs. 4,565?
Rs. 452.75
Rs. 570.50
Rs. 350.20
Rs. 412.50
4565= C * [(1+0.15)^7 – 1]/0.15
Solve for C
Question No: 8 ( Marks: 1 ) - Please choose one
What amount a borrower would pay at the end of second year with a 4 -year, 12%, interest- only loan of Rs. 3,000?
Rs. 360
Rs. 2,000
Rs. 3,000
Rs. 3,360 p69
Interest-Only Loans
•Calls for the borrower to pay interest each period and to repay the entire principal at some time in the future.
•With a 3-year, 10%, interest-only loan of $1,000, the borrower would pay $1,000 x 0.10 = $100 in interest at the end of first and second years,
•At the end of third year, he would return $1000 plus the $100 in interest for that year.
Question No: 9 ( Marks: 1 ) - Please choose one
Which of the following is the expected rate of return on a bond if bought at its current market price and held to maturity?
Current Yield Yield To Maturity Coupon Yield
Capital Gains Yield
Question No: 10 ( Marks: 1 ) - Please choose one
The price of a R s.1, 000 -face value bond is Rs.1, 000. What will be the yield to maturity if there is a coupon payment of Rs. 80 for 6 years?
Greater than 8% p77
Lower than 8%
Equal to 8%
Cannot be determined without more information
Bond value = C x [1 - 1/ (1 + r)t]/r + F/(1 + r)t
Where: C = the promised coupon payment
F = the promised face value
t = number of periods until the bond matures
r = the market’s required return, YTM
Question No: 11 ( Marks: 1 ) - Please choose one
Which of the following short- term rating by PACRA denotes an in adequate capacity to ensure timely repayment?
A
B
C
D
Question No: 12 ( Marks: 1 ) - Please choose one
Which one of the following statements is INCORRECT regarding zero coupon bonds?
Zero coupon bonds pay no interest at all.
Zero coupon bonds are offered at a price that is much lower than its stated value.
The issuer of a zero coupon bond deducts interest every year because interest is actually paid every year.
The issuer of a zero coupon bond deducts interest every year even though interest is not actually paid every year.
Question No: 13 ( Marks: 1 ) - Please choose one
An investment should be accepted if the net present value is __________ and rejected if it is ________.
Positive; positive Positive; negative p105
Negative; negative
Negative; positive
Question No: 14 ( Marks: 1 ) - Please choose one
An investment is acceptable if its calculated payback period is _________ than/to some specified number of years.
More Less p105
Equal
None of the given options
“An investment is acceptable if its calculated payback period is less than some specified
number of years.”
Question No: 15 ( Marks: 1 ) - Please choose one
The rate at which NPV equals to zero is called :
Average Accounting Return (AAR)
Internal Rate of Return (IRR)
Required Rate of Return (RRR)
Weighted Average Cost of Capital (WACC)
Question No: 16 ( Marks: 1 ) - Please choose one
A project whose acceptance prevents the acceptance of one or more alternative projects is referred to as:
A mutually exclusive project
An independent project
A dependent project
A contingent project
http://wps.pearsoned.co.uk/ema_uk_he_wachowicz_fundfinman_12/26/6680/1710103.cw/content/index.html
Q#20
Question No: 17 ( Marks: 1 ) - Please choose one
___________ Cost is an outlay that has already occurred and hence is not affected by the decision under consideration.
Sunk
Opportunity
Fixed
Variable
Question No: 18 ( Marks: 1 ) - Please choose one
___________ Cost refers to the cash flows that could be generated from an asset the firm already owns provided it is not used for the project in question.
Sunk
Opportunity
Fixed
Variable
Question No: 19 ( Marks: 1 ) - Please choose one
If two projects are _______________, the fact that they have unequal lives will not affect the analysis.
Mutually exclusive
Dependent Independent
Correlated
http://www.docstoc.com/docs/8183229/CFA-Quiz-11
Question No: 20 ( Marks: 1 ) - Please choose one
Mr. A, as a financial consultant, has prepared a feasibility report of a project for XYZ Company that the company is planning to undertake. He has suggested that the project is feasible. The consultancy fee paid to Mr. A will be considered as:
Sunk cost p120
Opportunity cost
Both sunk cost and opportunity cost
Neither sunk cost nor opportunity cost
Sunk Costs
•A cost that has already been incurred and cannot be recouped and therefore should not be considered in an investment decision
•e.g. a consultant’s fee for evaluating the option of launching a new product
Question No: 21 ( Marks: 1 ) - Please choose one
Which one of the following is TRUE about the difference between debt and common stock?
Debt is ownership but equity is not
Creditors have voting power while stockholders do not
Interest payments are promised while dividend payments are not Both stockholders and bondholders have voting privileges
http://highered.mcgraw-hill.com/sites/0073405132/student_view0/chapter7/chapter_quiz.html Q#9
Question No: 22 ( Marks: 1 ) - Please choose one
Which one of the following typically applies to preferred stock but not to common stock?
Dividend yield
Cumulative dividends
Voting rights
Tax deductible dividends http://odin.lcb.uoregon.edu/aemami/318Practice/PRACTICE%207/Chpt07.htm?As4=1&Rf1=&Rf1=&Rf1=&Rf
1=&Rf1=&Rf1=&Rf1=&Rf1=&TA99=&TA100=&TA101=&TA102=&TA103=&TA104=&TA105=&TA106=
&TA107= Q#4
Question No: 23 ( Marks: 1 ) - Please choose one
Which of the following statement is INCORRECT regarding Average Accounting Return?
AAR is a rate that makes the NPV equal to zero p119
AAR is a measure of accounting profit relative to book value
An investment is acceptable if its AAR is greater than a benchmark AAR None of the given options
•Average Accounting Return
•AAR is a measure of accounting profit relative to book value
•AAR rule is to take an investment if its AAR exceeds a benchmark AAR
Question No: 24 ( Marks: 1 ) - Please choose one
According to 2 M&M proposition, cost of equity does NOT depend upon which of the following?
The required return of firm s assets
The firm s cost of debt
The firm’s stockholders p153
The firm’s debt-equity ratio
•This 2nd proposition tells us that the cost of equity depends on three things
•The required return on firm’s assets RA
•The firm’s cost of debt RD, and
•The firm’s debt-equity ratio D/E