MCQ on Valuation of Bonds
Financial Management 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?
(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
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