Financial Management

✅ The correct answer is D.
Size of firm and market or book ratio are variables which are related to stock returns. Stock Market Returns are the returns that the investors generate out of the stock market. This return could be in the form of profit through trading or in the form of dividends given by the company to its shareholders from time-to-time.

✅ The correct answer is D.
In cash flow analysis, two projects are compared by using common life is classified as replacement chain approach and common life approach.

✅ The correct answer is A.
Situation in which company replaces existing assets with new assets is classified as replacement projects. A replacement project is an undertaking in which the company eliminates a project at the end of its life and substitutes another investment.

✅ The correct answer is D.
In arbitrage pricing theory, required returns are functioned of two factors which have dividend policy and market risk. Arbitrage pricing theory (APT) is a multi-factor asset pricing model based on the idea that an asset’s returns can be predicted using the linear relationship between the asset’s expected return and a number of macroeconomic variables that capture systematic risk.

✅ The correct answer is A.
Portfolios lying on the upper right portion of the efficient frontier are likely to be chosen by aggressive investors. A portfolio is a grouping of financial assets such as stocks, bonds, commodities, currencies and cash equivalents, as well as their fund counterparts, including mutual, exchange-traded and closed funds

✅ The correct answer is B.
Current option price = Current value of stock – Present value of portfolio
= Rs. 2300 – Rs. 1300 = Rs. 1000.

✅ The correct answer is A.
An official entity that represents bondholders and ensures stated rules in indenture is classified as trustee. A trustee is a person or firm that holds and administers property or assets for the benefit of a third party. A trustee may be appointed for a wide variety of purposes, such as in the case of bankruptcy, for a charity, for a trust fund, or for certain types of retirement plans or pensions.

✅ The correct answer is A.
Relationship between risk free asset and a single risky asset are always linear. The covariance of the risk-free asset with any risky asset or portfolio will always equal zero. Similarly the correlation between any risky asset and the risk-free asset would be zero. Combining a Risk-Free Asset with a Risky Portfolio Expected return: the weighted average of the two returns is a linear relationship.

✅ The correct answer is A.
If coupon rate is equal to going rate of interest then bond will be sold at par value. A coupon payment on a bond is the annual interest payment that the bondholder receives from the bond’s issue date until it matures. Coupons are normally described in terms of the coupon rate, which is calculated by adding the sum of coupons paid per year and dividing it by the bond’s face value.

✅ The correct answer is C.
In expected rate of return for constant growth, capital gains is divided by beginning price to calculate yield of capital gains. A capital gains yield is the rise in the price of a security, such as common stock. For common stock holdings, the CGY is the rise in the stock price divided by the original price of the security.