Financial Management MCQ on Valuation of Bonds

MCQ on Valuation of Bonds

1. Which is the lowest yield actually attained in the market by high grade bonds of a given class and maturity?

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(a) Nominal return

(b) Basic yield

(c) Gross yield

(d) Current yield

Ans-(b) Basic yield

2. The instrument having fixed maturity period before winding up is known as:

(a) Registered debentures

(b) Bearer debentures

(c) Perpetual debentures

(d) Redeemable debentures

Ans-(d) Redeemable debentures

3. The debentures that give the investor the right to prematurely sell them to issuer on certain specific terms are called as:

(a) Callable debentures

(b) Zero coupon bonds

(c) Puttables debentures

(d) Commodity linked bonds.

Ans-(c) Puttables debentures

4. What indicates? When both long term rates and short term rates are equal.

(a) Upward slope

(b) Flat

(c) Downward slope

(d) Humped slope

Ans-(b) Flat

5. The bonds that do not carry any regular interest payment rather they are issued at steep discount and are redeemed at the face value on their maturity are:

(a) zero coupon bonds

(b) Straight bonds

(c) convertible debentures

(d) Perpetual debentures

Ans-(a) zero coupon bonds

6. Government securities are the debts issue by:

(a) State government

(b) Quasi government agencies

(c) Central government

(d) Any of these

Ans-(d) Any of these

7. Which rate of discount that makes the present value of all revenues in terms of cash inflows from investment equal to the cash outflows is:

(a) Bond rate

(b) Coupon rate

(c) Yield rate

(d) None of these

Ans-(c) Yield rate

8. Gilt-edged securities are:

(a) Government debentures

(b) Deposits

(c) Shares

(d) None of these

Ans-(a) Government debentures

9. Straight bonds are also known as which of the following ?

(a) Puttables debentures

(b) Plain vanilla bonds

(c) Zero coupon bonds

(d) Commodity linked bonds

Ans-(b) Plain vanilla bonds

10. Which factors mainly affect the required rate of return?

(a) Real growth rate

(b) Future expectations 

(c) Inflation rate

(d) All of these

Ans-(d) All of these

11. Yield to maturity is what?

(a) Current yield

(b) Combination of current yield and annual appreciation or depreciation

(c) Annual appreciation or depreciation

(d) None of the above

Ans-(b) Combination of current yield and annual appreciation or depreciation

12. The value of holding period return is always show:

(a) Equal to 0

(b) Less than 0

(c) Greater than 0

(d) Negative

Ans-(c) Greater than 0

13. The yield curve shows the relationship between:

(a) Yield to maturity and terms to maturity

(b) Terms to maturity and price

(c) Yield to maturity and price

(d) None of these

Ans-(a) Yield to maturity and terms to maturity

14. The yield curve representing the structure of interest rates of bonds may follow the?

(a) Downwards

(b) Humped

(c) Upwards

(d) Any pattern

Ans-(d) Any pattern

15. Current yield is equal to What ?

(a) Running yield

(b) Income yield

(c) Market yield

(d) Any of these

Ans-(d) Any of these

16. What indicate the relationship between interest rate and reinvestment rate

(a) Zero

(b) Positive

(c) Negative

(d) Perfectly negative

Ans-(b) Positive

17. The greater long term rates as compared to short term rates is an indicator of which of the following ….

(a) Upward slope

(b) Downward slope

(c) Flat

(d) Humped slope

Ans-(a) Upward slope

Also Read Financial Management MCQ

  1. Financial Management MCQ-Fundamentals
  2. FM MCQ on Time Value of Money
  3. Financial Management MCQ on Risk and Return
  4. Financial Management MCQ on Equity Valuation
  5. Financial Management MCQ on Valuation of Bonds
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