Financial Management

✅ The correct answer is B.
An investor who writes stock call options in his own portfolio is classified as covered option. A covered call option occurs when the investor owns the underlying asset and writes a call so that the underlying is on hand to sell to the option holder if the option is exercised. A covered put option occurs when the investor writes a put and has enough cash to cover the strike if the put is exercised.

✅ The correct answer is A.
According to the MM model, the dividend decision is irrelevant. Modigliani and Miller suggested that in a perfect world with no taxes or bankruptcy cost, the dividend policy is irrelevant. They proposed that the dividend policy of a company has no effect on the stock price of a company or the company’s capital structure.

✅ The correct answer is D.
A type of beta which incorporates about company such as changes in capital structure is classified as fundamental beta. A measure that helps determine the potential risk of a security using current and future predicted fundamental information of the company, including market-related and financial data.

✅ The correct answer is A.
Investment = Final price – Capital gain

= 50 – 20

= 30

✅ The correct answer is C.
Corporations that buy financial instruments with money accepted from savers are classified as mutual funds. A mutual fund is a type of financial vehicle made up of a pool of money collected from many investors to invest in securities such as stocks, bonds, money market instruments, and other assets.

✅ The correct answer is C.
Book value is the accounting value of the firm as reflected in the financial statements. Book value is also the net asset value of a company calculated as total assets minus intangible assets (patents, goodwill) and liabilities.

✅ The correct answer is D.
Type of basic financial statements consist of balance sheet and income statement, statement of retained earning and statement of cash flows.

✅ The correct answer is B.
Long -term solvency is indicated by Debt-equity ratio. The debt-to-equity (D/E) ratio is calculated by dividing a company’s total liabilities by its shareholder equity. These numbers are available on the balance sheet of a company’s financial statements.

✅ The correct answer is B.
Companies that help to set benchmarks are classified as benchmark companies. Benchmarking is the practice of comparing business processes and performance metrics to industry bests and best practices from other companies.

✅ The correct answer is C.
Preferred stock = Preferred dividend / Required rate of return * 100
= 50 / 2.5 * 100 = Rs. 2000.