Financial Management

Financial Management MCQs with Answers and Explanations | Corporate Finance & Investment Objective Questions

Master the core concepts of Financial Management with our comprehensive set of MCQs with answers and detailed explanations. Covering topics such as time value of money, capital budgeting, cost of capital, working capital management, capital structure, dividend policy, risk and return, portfolio management, and financial planning, these questions are ideal for students, teachers, and candidates preparing for professional and competitive exams (CA, ACCA, ICMA, CFA, MBA, BBA, CSS, PMS, NTS, FPSC, PPSC, UPSC, etc.). Each MCQ is followed by a clear explanation to build strong concepts, sharpen decision-making skills, and enhance exam readiness. Perfect for practice, revision, and self-assessment in the field of Financial Management and Corporate Finance.

215. Pricing model approach in which it is assumed that stock price can have one of two values of stock is classified as

valued approach
marketability approach
stock approach
binomial approach
✅ The correct answer is D.
Pricing model approach in which it is assumed that stock price can have one of two values of stock is classified as binomial approach. The binomial option pricing model is an options valuation method developed in 1979. The binomial option pricing model uses an iterative procedure, allowing for the specification of nodes, or points in time, during the time span between the valuation date and the option’s expiration date.

217. Risk free rate is subtracted from expected market return is considered as

country risk
diversifiable risk
equity risk premium
market risk premium
✅ The correct answer is C.
Risk free rate is subtracted from expected market return is considered as equity risk premium. Equity risk premium refers to the excess return that investing in the stock market provides over a risk-free rate.

219. In regression of capital asset pricing model, an intercept of excess returns is classified as

Sharpe’s reward to variability ratio
tenor’s reward to volatility ratio
Jensen’s alpha
tenor’s variance to volatility ratio
✅ The correct answer is C.
In regression of capital asset pricing model, an intercept of excess returns is classified as Jensen’s alpha. Jensen’s Alpha, also known as the Jensen’s Performance Index, is a measure of the excess returns earned by the portfolio compared to returns suggested by the CAPM model. It represents by the symbol α. The value of the excess return may be positive, negative, or zero.
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