Classical

UGC NET December 2014 - Paper 2

16:  

Consider the tollowing two statements:

Statement I :  Bond value would decline when the market rate of interest rises.
Statement II : There is a positive relationship between the value of a bond and the interest rate.
Select the correct code:
A.

Statement I and Statement II both are correct.

B.

Statement I is correct, but Statement II is incorrect.

C.

Statement II is correct, but Statement I is incorrect.

D.

Statement I and Statement II both are incorrect.

 
 

Option: B

Explanation :


17:  

Match the following techniques of capital budgeting given in List - I with one of the Characteristics given in List - II and select the correct code:

                    List – I

        List - II

a.  NPV

i.  Under certain circumstances its reciprocal is a good approximation of the rate of return

b.  IRR

ii.  Shareholder's wealth maximisation

c. Profitability Index

iii.  Possibility of multiple outcomes in single calculation

d. Payback period

iv.  Measure of projects' relative profitability

 

A.

a  b   c   d

i   ii   iii  iv

B.

a   b   c   d

ii   iii   iv  i

C.

a   b   c   d

iii   iv   i  ii

D.

a  b   c   d

iv   i   ii  iii

 
 

Option: B

Explanation :


18:  
In the case of redeemable debentures issued at discount and to be redeemed at par, approximate cost of debenture (before tax adjustment) will be equal to
A.

rate of interest

B.

amount of interest divided by issue price

C.

amount of interest divided by par value

D.

(amount of interest + ([par value - issue price]/ tenure of debenture))/((par value + issue price) /2)

 
 

Option: D

Explanation :


19:  
While granting the term loan, if lending institution puts a condition to reduce the debt-equity ratio by issuing additional equity share-capital or preference share capital, it is known as
A.

asset-related restrictive covenant

B.

cash flow related restrictive covenant

C.

control related restrictive covenant

D.

liability related restrictive covenant

 
 

Option: D

Explanation :


20:  
According to Lintner's model of corporate dividend behaviour, the dividend for the year 't' is dependent on :
I. earnings per share for the year t
II. dividend per share for the year t-1
III. adjustment rate
IV. target pay-out ratio
V. market price of share
Select the correct code:
A.

I, II and III are correct.

B.

II, Ill, IV and V are correct.

C.

I, II, IlI and IV are correct.

D.

I, II, IV and V are correct.

 
 

Option: C

Explanation :




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