December 2014 - Paper 2

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3. December 2014
4. 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.
	Answer Report Discuss
	Option: B Explanation : Click on Discuss to view users comments. Write your comments here: Updating your Comments.. Updating your Comments..

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
	Answer Report Discuss
	Option: B Explanation : Click on Discuss to view users comments. Write your comments here: Updating your Comments.. Updating your Comments..

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)
	Answer Report Discuss
	Option: D Explanation : Click on Discuss to view users comments. Write your comments here: Updating your Comments.. Updating your Comments..

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
	Answer Report Discuss
	Option: D Explanation : Click on Discuss to view users comments. Write your comments here: Updating your Comments.. Updating your Comments..

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.
	Answer Report Discuss
	Option: C Explanation : Click on Discuss to view users comments. Write your comments here: Updating your Comments.. Updating your Comments..

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