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86. The following two statements relate to Capital Asset Pricing Model. Choose the correct code for the statements being correct or incorrect. Statement I: Beta is a measure of a security’s risk relative to the risk of the market portfolio. Statement II: The value of Beta measures both the systematic and the unsystematic risks of a security. Code:
Statement I is correct, but II is incorrect.
Statement II is correct, but I is incorrect.
Both the statements I and II are correct.
Both the statements I and II are incorrect.
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87. The following two statements relate to financial derivatives. Choose the correct code for the statements being correct or incorrect. Statement I: When an option is allowed to be exercised only on the maturity date, it is called an American option. Statement II: If the option holder does not lose or gain whether he exercises his option or buys or sells the asset from the market, the option is said to be at-the-money. Code:
88. Given below are two statements, one labelled as Assertion (A) and the other labelled as Reason (R). Read the statements and choose the correct answer using the code given below. Assertion (A): The nominal interest rate comprises of a real interest rate and an expected rate of inflation, and it adjusts when the inflation rate is expected to change. Hence, in the perfect international capital markets, the real rate of returns are equal in the two countries. Reason (R): The international Fisher Effect states that the nominal interest rate differential must be equal to the expected inflation rate the differential in the two countries. Code:
Both (A) and (R) are correct and (R) is the right explanation of (A).
Both (A) and (R) are correct, but (R) is not the right explanation of (A).
(A) is correct, but (R) is not correct.
Both (A) and (R) are incorrect.
89. A public limited company has 9,00,000 shares outstanding at current market price of RS.130per share. The company needs RS.2.25 crores to finance its proposed new project. The board of the company has decided to issue rights shares to raise the required money at RS.75 per share (as subscription price) to ensure that the rights issue is fully subscribed. How many rights are required to purchase a new share?
One right
Two rights
Three rights
Four rights
90. A manufacturing company has an expected usage of 50,000 units of a certain product during next year. The cost of processing an order is RS 20 and the carrying cost per unit is RS 0.50 for one year. What will be the Economic Ordering Quantity?
2500 units
2000 units
1500 units
1000 units
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