Financial Management

✅ The correct answer is B.
Stock issued by company have lower rate of return because of low book to market ratio. The book-to-market ratio is used to find a company’s value by comparing its book value to its market value.

✅ The correct answer is A.
In cash flow estimation and risk analysis, real rate will be equal to nominal rate if there is no inflation.

✅ The correct answer is C.
Current price = Paid dividend / Dividend yield percentage
= Rs. 20 / 40% = Rs. 50.00

✅ The correct answer is A.
Nominal rate which is quoted to consumers on loans is considered as annual percentage rate. An annual percentage rate (APR) is the annual rate charged for borrowing or earned through an investment. APR is expressed as a percentage that represents the actual yearly cost of funds over the term of a loan.

✅ The correct answer is A.
In capital budgeting, two projects who have cost of capital as 12% is classified as hurdle rate. A hurdle rate is the minimum rate of return on a project or investment required by a manager or investor.

✅ The correct answer is A.
Case in which average investors risk aversion is greater than slope of line and risk premium respectively is steeper, greater. Risk aversion means that investors will tend to purchase safe assets like highly rated bonds and CDs. Risk-averse individuals seek capital preservation over growth, which may actually be detrimental for those who are younger.

✅ The correct answer is B.
A bond whose price will rise above its face value is classified as premium bond. A premium bond is a bond trading above its face value or in other words; it costs more than the face amount on the bond.

✅ The correct answer is D.
Under trading means low turnover of working capital. Under-trading is the reverse of over-trading. It means keeping funds idle and not using them properly. This is due to the under employment of assets of the business, leading to the fall of sales and results in financial crises.

✅ The correct answer is B.
Rate of return which is required to satisfy stockholders and debt holders is classified as weighted average cost of capital. Weighted average cost of capital ( WACC) is the average after-tax cost of a company’s various capital sources used to finance the company.

✅ The correct answer is B.
Right of common stockholders to purchase additional stock issued by company is classified as pre-emptive right. A preemptive right offers select shareholders of a corporation the right to buy a proportional interest in any future issue of the company’s common stock.