Financial Management

✅ The correct answer is B.
Markets dealing with residential loans, industry real estate loans, agricultural loans and commercial loans are called mortgage markets. The mortgage market can seem complicated to the uninitiated. The fact is that it is not as complicated as it is ever-changing. Most people have no idea how the market works. By understanding this, you will get a better idea about mortgage programs that are offered by certain lenders. Armed with this new information, you can make an informed decision in your quest for the perfect mortgage.

✅ The correct answer is A.
In binomial approach of option pricing model, value of stock is subtracted from call option obligation value to calculate current value of portfolio. It is referred to as mark-to-market and involves multiplying the current share price of the stock by the number of shares owned and summing these values for a total portfolio value.

✅ The correct answer is A.
In Corporation characteristics, losses are subject to funds invested actually is considered as limited liability. Limited liability is a type of legal structure for an organization where a corporate loss will not exceed the amount invested in a partnership or limited liability company. In other words, investors’ and owners’ private assets are not at risk if the company fails.

✅ The correct answer is D.
Type of risk in which beta is equal to one is classified as average risk stock. An average-risk stock is defined as one that tends to move up and down in step with the general market.

✅ The correct answer is C.
An uncovered cost at start of year is divided by full cash flow during recovery year then added in prior years to full recovery for calculating payback period. The payback period refers to the amount of time it takes to recover the cost of an investment. Simply put, the payback period is the length of time an investment reaches a breakeven point.

✅ The correct answer is D.
Salvage Cash flow = Free cash flow – Operating cash flow – Investment outlay cash flow
= 12000 – 4000 – 5000 = Rs. 3000.

✅ The correct answer is E.
A bond issue is broken up so that some investors will receive only interest payments while others will receive only principal payments, which is an example of un-bundling and financial engineering.

✅ The correct answer is B.
Profitability index = Present value of future cash flow / Initial cost
= 2000 / 1100 = 1.82%.

✅ The correct answer is D.
The risk that arises due to change in the purchasing power is called Inflation risk. Inflation risk, also called purchasing power risk, is the chance that the cash flows from an investment won’t be worth as much in the future because of changes in purchasing power due to inflation.

✅ The correct answer is C.
A premium which reflects possibility of issuer who does not pay principal amount of bonds is called default risk premium. A default risk premium is effectively the difference between a debt instrument’s interest rate and the risk-free rate.