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Monday, December 3, 2012

MGT411 mid term old past papers 2010


MIDTERM  EXAMINATION Spring 2010
MGT411- Money &  Banking (Session - 6)

Time: 60 min
Marks: 44



Question No: 1    ( Marks: 1 )      - Please choose one

Financial instruments are evolved just as                        .
Currency
Stock
Bond
Commodity

Question No: 2    ( Marks: 1 )      - Please choose one

Core principles of Money and Banking include each of the following Except?

All people act rationally
Time has value
Information is the basis for decisions
Risk requires compensation

Question No: 3    ( Marks: 1 )      - Please choose one

Which of the following is a drawback of Fiat money?

Fewer resources are used to produce money
The quantity of money can be determined by rational human judgment
A corrupt Government might issue excessive amount  of money thus causing inflation
Fiat money doesnt have any drawback

Question No: 4    ( Marks: 1 )      - Please choose one

Which one of the following is NOT true for money?
Money is an asset
Money is a standard mode of payment
Money is same as wealth

Money is readily spend able asset

Question No: 5    ( Marks: 1 )      - Please choose one
                                                                                                                                                    
derivative instrument:
Gets its value and payoff from the performance of the underlying instrument
Is a high risk financial instrument used by highly risk averse savers
Comes into existence after the underlying instrument is in default
Should be purchased prior to purchasing the underlying security

Question No: 6    ( Marks: 1 )      - Please choose one

Financial intermediaries provide small lender-savers all of the following advantages EXCEPT:
Greater liquidity
Lower transaction cost
Lower risk
Higher return

Question No: 7    ( Marks: 1 )      - Please choose one
                                                                                                                                                    
The future value of $100 left in a savings account earning 4.5% for two and a half years is best expressed by:
$100(1.045)3/2
$100( 0.45)2.5
$100(1.045)2.5
100 x 2.5 x (1.045)

Question No: 8    ( Marks: 1 )      - Please choose one

is the today's value of a payment that is promised to be made in the future.
None of the given options
Future value
Present value
Agreed value

Question No: 9    ( Marks: 1 )      - Please choose one
                                                                                                                                                    
You receive a check for $500 three years from today. The discounted present value of this $500 is
.
$500/(1+i)
$500*(1+i)
$500/(1+i)3
$500*(1+i)3

Question No: 10    ( Marks: 1 )      - Please choose one
                                                                                                                                                    
Ithe internal rate of return from an investment is less than the opportunity cost of funds:
Firm should make the investment
Firm should not make the investment
Firm should only make the investment using retained earnings
None of the given options

Question No: 11    ( Marks: 1 )      - Please choose one
                                                                                                                                                    
Ainvestment carrying a current cost of $130,000 is going to generate $70,000 of revenue for each of the next three years. To calculate the internal rate of return we need to:
Calculate the present value of each of the $70,000 payments and multiply these and set this equal to $130,000
Take the present value of $210,000 for three years from now and set this equal to
$130,000
Set the sum of the present value of $70,000 for each of the next three years equal to
$130,000
Subtract $130,000 from $210,000 and set this difference equal to the interest rate

Question No: 12    ( Marks: 1 )      - Please choose one
                                                                                                                                                    
The real interest rate is:
The nominal rate plus the expected inflation rate
The nominal rate minus the expected inflation rate
The nominal interest rate divided by the Consumer Price Index
The product of the nominal rate and the Consumer Price Index

Question No: 13    ( Marks: 1 )      - Please choose one

What is true about the relationship between standard deviation and risk?
Greater the standard deviation greater will be the risk
Greater the standard deviation lower will be the risk
Greater the standard deviation risk will be remained the same
No relation between them

Question No: 14    ( Marks: 1 )      - Please choose one

Most of the people among us are                       .
Risk lovers
Risk enhancers
Risk averse
Risk tolerating

Question No: 15    ( Marks: 1 )      - Please choose one
                                                                                                                                                       
MrA has a Treasury bill with a maturity period of 6 months where as Mr. B has a bond with a maturity period of 1 year. Which of the following statement is NOT true for this situation?

Mr. A has paid less price for his bond than Mr. B
Mr. A and Mr. B is a holder of zero coupon bond
Mr. A will receive payment at the end of the maturity period
Mr. B will receive the payment at the end of the maturity period

Question No: 16    ( Marks: 1 )      - Please choose one
                                                                                                                                                    
For a $1000 one year discount bond with a price of $975, the yield to maturity is which of the following?
$975/$1000
($1000 $975)/$975
($1000 – $975)/($1000)
$1000/$975

Question No: 17    ( Marks: 1 )      - Please choose one

Current yield is equal to which of the following?
Price paid / yearly coupon payment
Price paid *yearly coupon payment
Yearly coupon payment / face value of bond
Yearly coupon payment / price paid

Question No: 18    ( Marks: 1 )      - Please choose one
                                                                                                                                                    
The return on the bond is equal to which of the following?
Coupon rate + rate of capital gains
Current yield + rate of capital gains
Coupon rate - rate of capital gains
Current yield - rate of capital gains

Question No: 19    ( Marks: 1 )      - Please choose one
                                                                                                                                                    
Aincrease in the expected inflation shifts the bond demand to the
Right
Left
No change
None of the given options

Question No: 20    ( Marks: 1 )      - Please choose one

Calculate tax implication on Bond yields. Consider a one year bond face value Rs.100 (issued by Government) with coupon rate of 6%.What is the income of bond that is received at maturity? (Tax rate is 30%).
Rs.6
Rs.1.80
Rs.4.20

Rs.7.80

Question No: 21    ( Marks: 1 )      - Please choose one
                                                                                                                                                    
Ithe tax rate is higher than gap between yield on taxable and tax exempt bond?
Shorter
Wider
No gap
Any thing can be possible

Question No: 22    ( Marks: 1 )      - Please choose one

Expectation hypothesis focuses on which one of the following?
Risk premium
Risk free interest rate
Yield to maturity
None of the given options

Question No: 23    ( Marks: 1 )      - Please choose one

Stock market bubbles can lead to:

An inefficient allocation of resources
Stock market crashes
Patterns of volatile returns from the stock market
All of the given options

Question No: 24    ( Marks: 1 )      - Please choose one

Without the ability of financial intermediaries to pool the resources of small savers:
Borrowers needing large amounts of money would find it less costly to obtain the funds
The economy would likely grow faster
People would likely save more
The risk associated with lending would increase

Question No: 25    ( Marks: 1 )      - Please choose one
                                                                                                                                                    
The fact that a financial intermediary can use the same contract for many customers is an example of:
Economies of Scope
The Law of Diminishing Marginal Returns
The Law of Increasing Opportunity Cost
Economies of Scale

Question No: 26    ( Marks: 1 )      - Please choose one

Requiring a large deductible on the part of an insured is one way insurers treat the problem of:
Free-riding

Moral hazard
Adverse selection
The Lemons market

Question No: 27    ( Marks: 1 )      - Please choose one

Financial instruments are used to transfer which of the following?
Both Risk and Resources
Risk
Resources
Mortgages

Question No: 28    ( Marks: 1 )      - Please choose one
                                                                                                                                                   
change in the interest rate:


Has a larger impact on the present value of a payment  to be made far into the future than one to be made sooner
Will not have a difference on the present value of two equal payments to be made at
different times
Has a smaller impact on the present value of a payment to be made far into the future than one to be made sooner
None of the given options


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