CAIIB - FINANCIAL MANAGEMENT MODULE - A MODEL QUESTIONS 1)What is sampling for groups with considerable variation within but

t similar to each other called ? a) cluster b) stratified c) systematic d) random 2)What are sampling groups which are very similar within but dissimilar without are called ? a) cluster b) stratified c) systematic d) random 3)In which of the situations would ! not be the correct formula for "ampling #n a) infinite population b) finite population with replacement c) finite population without replacement d) none of the above $) What does the %entral tendency theorem state ? a) as the sample si&e increases the sampling distribution of the mean will approach normality irrespective of the shape of the population distribution b) the mean of the sampling distribution of the mean will e'ual the population mean even if the population is not normal c) uses of sample statistics to ma(e inferences of the the population parameters without (nowledge of the of the fre'uency distribution d) all of the above )) a) b) c) d) What variation does moving average method eliminate*? seasonal %yclical Irregular secular trend

+) What "tream of cash flows continue indefinitely ? a) perpetuity, b) annuity c) futurity d) none of the above

-) What is the difference between real . nominal cash flows due to ? a) compounding b) discounting c) annuity d) inflation /) 0n what is the magnitude of discount rate dependent upon ? a) inflation b) preference or consumption c) ris( d) all of them 1) While positive cash flows are good for an enterprise what do negative cash flows indicate* a) losses b) a or c or d c) investments d) cash crunch 12) 0f what is sin(ing fund an e ample of ? a) perpetuity b) annuity c) gratuity d) none of the above 11) What is a scatter diagram ? a) diagram which scatters all elements of the variable* b) 3 graphic representation of the relationship of the variables c) 4elps plot observed values d) b. c 12) In what range does correlation coefficient lie ? a* 2 to 51 b* 61 to 2 c* 61 to 51 d* 7 1 13) 8oint estimate is often insufficient* Why ? e* decision is inversely proportional to the number of estimates f* difficult to pinpoint the correct single estimate g* because it does not provide the e tent of error h* a . c

1$) If a standard error of a statistic is less than that of another then what is the former is said to be* a ) efficient b) unbiased c) consistent d) sufficient 1)) What is interest on a bond (nown as ? i* return 9* yield (* coupon l* maturity value 1+) 0verstating the return on premium bonds and understating the return on discount bonds is generally true when we use one of the following as an indicator* Which one is it ? a* yield to maturity b* current yield c* rate of return d* discount rate 1-) :ield to maturity is that rate which ma(es the 8resent ;alue of the bond payments e'ual to its buying price* Which of the following is it*? e* coupon rate f* discount rate g* compound rate h* rate of return 1/) What does the rate of return e'ual to if interest rates do not change during the pendency of the bond ? a* yield to maturity b* coupon rate c* compounded rate d* current yield 11)) What is a survey of parliamentarians, see(ing their opinion on revision of per(s, called? a) b) c) d) biased sampling stratified sampling random sampling systematic sampling

22) 4ow is stratified sampling carried out? a)divide the population into homogenous groups and select e'ually but randomly* b) assigning numbers to the population . selecting the numbers c) sample is made up of elements which are say 12th from the previous selection d)population divides itself into groups and we select e'ually but randomly from each 21) Why do sampling errors occur ? a) differences between sample and population b) differences among samples themselves c) choice of elements of sampling d) all of the above 22) If <! standard error of mean, ! standard deviation of the mean, n ! sample si&e, = ! population si&e, > ! population mean, sample mean ! < What is the standard error of the mean for finite populations ? a) << ! * #n b) x = (N-n) n (n-1) c) & ! > d) <! #?=6n) #n 23) Which variation does moving average method eliminate? a* "easonal b* %yclical c* Irregular d) secular trend 2$) Why is a discount rate used to calculate net present value? a) money has value b) money has enhancing value c) money has diminishing value d) money has constant value 2)) What does net present value give? a) future values of present cash flows b) present value of present cash flow c) present value of future cash flows d) future values of future cash flows

2+) What is repayment of entire loan principal at the end of the loan period called ? a) balloon payment b) compounded payment c) annuity d) term payment 2-) What is the rule of -2 ? a) 12 times table b) rule for calculating future cash flows c) rule for compounding present cash flows d) rule for (nowing how 'uic(ly money doubles 2/) If prices double, what happens to real value of rupee?* a) remains same b) doubles c) halves d) changes in unli(e proportions

21) Which method which helps draw a line between the set of scattered points e) regression method f) correlation method g) least s'uare method h) least fit method 32) 0ut of the following, which 3 measures are used in correlation analysis@ a)standard error, b)covariance, c)standard deviation, d)coefficient of correlation, e) coefficient of determination* 1) a, b, c 2) a, c, e 3) b, d, e $) b, c, e 31)Ahe value of a statistic tends towards the value of the population as si&e increases* What is it said to be ? a) sufficient b) consistent c) efficient d) unbiased

32) In a normal distribution 1)*)B of all the sample statistics are within CCCCCstandard errors of the population parameter a) D )B b) D 2*2)B c) D 3B d) none of the above

33) E3s the output increases, the productivity per wor(er increases*F What relationship does it lead to ? a) direct linear relationship b) curvilinear relationship c) inverse relationship d)none of the above 3$) If the maturity of a bond is long into the future the interest rate is higher* Why? a)longer term maturity is more sensitive to price fluctuation than shorter term b) the attractiveness of longer term is related to interest only c) longer term bonds are generally issued by institutions of lesser rating d) longer term maturity is less sensitive to fluctuation than shorter term 3)) What is a &ero coupon bond? a) there is gain only in price b) gain in coupon c) no gain at all d) none of these 3+) If coupon ! % , face value ! G , current price ! 8, discount rate ! H , balance period ! 3 ,then which of the following is yield to maturity a) % 5 86G 8?15H)I b) C + F (1+ )! (1 + )" c) % 8 d) G 8?15H)I

3-) 3 company manufactures Hadios? ) and Aape recorders?y)* %ost of ma(ing radio . tape recorder is Hs* 22) and Hs* 3-) respectively* Ahe company wor(s in 2 shift totaling 1$ hrs* Ahe production and assembly time for a radio is 2hrs while that for tape recorder is 3 hrs* Ahe radio sells for Hs*2)2 while the tape recorder sells for Hs*$12* Ahe company spends an amount of Hs* -),222 per day on production* Ja imi&e the production in terms of optimum number of radios and tape recorders* 8ic( the correct constraint e'uation from the choice given against each type* i) capacity constraint ?#$%&'n( )'#() a) b) c) d) 3 2 2 3 5 2y K 1$ 5 3y K 1$ 5 3y L1$ 5 2y L1$

ii) financial constraint ?$#*+n) $,$'-$b-()

a) 2)2 5 $12y K -)222 b) 3 5 )y K -)222 c) 3 5 )y K 1222 d) 3 5 )y L 1222 a) 7 2 N y 7 2 b) ! 2 N y ! 2 c) K 2 N y K 2 d) a . b a) b) c) d) 8 ! 2) 8 ! 22 8 ! 2) 8 ! 22 5 3)y 5 3)y 5 32y 5 3)y

iii) non M negativity ?#'n'#+# n+#b(.)

iv) ob9ective function ()* #$x'#'/( 0.*1'))

3/)3 firm ma(es chairs ? ) and tables?y)* Oach table costs Hs*$22 in material and Hs*1)2 in labor * each chair costs Hs*1-) in material and Hs*-) in labor* Ahe price of table and chair is Hs*+2) and Hs* 322 respectively* Ahe firm has 12 hours of time per day* Ahe production time for each table and chair is $ hrs, 1*) hrs respectively* Ahe firm has li'uidity of Hs*-222 per day to pay for the material and labor* Ahe ob9ective is to ma imi&e the production for the firm by optimi&ing the production of tables and chairs* 8ic( out the correct option for each of the constraint e'uation* a) capacity constraint ?#$%&'n( )'#() @ a) $ 5 1*)y K 12 b) 1*) 5 $y K 12 c) $ 5 1*)y L 12 d) 1*) 5 $y L 12 5 11y K -222 5 11y L -22 5 2)y K -222 5 2)y L -222

b) financial constraint ?$#*+n) $,$'-$b-()

@ a) ) b) ) c) 12 d) 12

c) non M negativity ?#'n'#+# n+#b(.)

@ a) L 2 N y L 2 b) ! 2 N y ! 2 c) P 2 N y P 2 d) b . c @a) 8 ! -) b) 8 ! )2 c) 8 ! )) d) 8 ! -) 5 )2y 5 -)y 5 -)y 5 )2y

d) ob9ective function (T* #$x'#'/( 0.*1'))

23)

3n amount of Hs*1,1),222 is e pected to be received one year from today at an interest rate ?discount rate) of 12B per year* What is its present value ? $4 Hs*121,222 b4 H"* 122,)22 %4 Hs*112,222 54 Hs*12$,)$)

67)

What is the two6year discount factor at a discount rate of 12B per year ? $4 2*/2+ b4 1*222

%4 2*121 54 2*/1$

61)

What is the opportunity cost of capital for a ris(y pro9ect ? $4 Ahe e pected rate of return on a government security having the same maturity as the pro9ect b4 Ahe e pected rate of return on a well diversified portfolio of common stoc(s %4 Ahe e pected rate of return on a portfolio of securities of similar ris(s as the pro9ect 54 a or b or c

68)

If the one year discount factor is 2*/333, what is the discount rate ?interest rate) per year? $ 4 12B b4 22B %4 32B 54 =one of the above

62) If the present value of a cash flow generated by an initial investment of Hs*122,222 is Hs*122,222, what is the =8; of the pro9ect? $4 Hs*122,222 b4 Hs*22,222 %4 Hs*122,222 54 =one of the above

66) Ahe following statements regarding the =8; rule and the rate of return rule are true with one e ception* Which one is it @ $4 3ccept a pro9ect if its =8; 7 2 b4 He9ect a pro9ect if its =8; P 2 %4 3ccept a pro9ect if its rate of return 7 2 54 3ccept a pro9ect if its rate of return 7 opportunity cost of capital

69) What is the concept of compound interest@? $4 Oarning interest on the principal b4 Oarning interest on previously earned interest %4 Investing for a number of years 54 =one of the above $+) If there is a indirect relationship between rainfall . yield of crops then a) yield is higher if rainfall is less b) yield is lower if rainfall is less c) yield is higher if rainfall is higher d) none of the above $-) If a ! 2 , b ! 1 , independent variable ! $ then dependent variable for an estimating line is a) 2 b) $ c) + d) none of the above $/) If the estimating e'uation is : ! a M b Q which of the following is true a) the y intercept is b b) slope of line is negative c) there is inverse relationship d) all of these e) b . c

$1) Ahe value of r2 is 2*$1 then coefficient of correlation is a) 2*$1 b) 2*c) 2*2d) cannot be determined )2) If the dependent variable increases with the independent variable then the coeff* of correlation is a) 2 to 61 b) 2 to M 2*)

c) 2 to 62 d) none of these )1) Ahe method of least s'uares finds the best fit line that CCCCCCC the error between observed . estimated points on the line a) ma imises b) minimi&es c) reduces to &ero d) b . c )2) If sign of r is negative then it indicates a) direct relationship between Q . : b) indirect relationship between Q . : c) inverse relationship between Q . : d) b or c )3) Gor : ! a 6 b Q we say that relationship between : and Q is a) direct . linear b) indirect . linear c) indirect . curvilinear d) direct . curvilinear )$) In the relationship between height and educational 'ualification a) the height is independent and education is dependent variable b) the height is dependent and education is independent variable c) there is inverse relationship between the two d) none of the above

))) In given Rrtly* data the first step in computing seasonal inde is calculating a) $ 'tr moving average b) discard highest and lowest values c) $ 'tr* Joving total d) none of the above )+)Gor a data of / half year periods the code for the -th half is a) 2

b) 3 c) + d) ) )-)When coding for odd number of periods Ahe following is done a) subtract each value from the smallest value b) subtract each value from the highest value c) subtract each value from the middlemost term d) none of the above )/)3 time series of annual data will contain which of the following components e) secular trend f) cyclical fluctuation g) seasonal variation h) a . c i) a . b )1)Hemoving the highest . lowest actual6to6moving average values when computing seasonal inde for annual data reduces 9) e treme cyclical variations () secular trend l) seasonal variations m) all of these +2) the repetitive movement around a trend line in a $6 month period is best described by n) seasonal variation o) secular trend p) cyclical fluctuation ') irregular variation

+1) the result of discarding e treme values before averaging is called CCCCCCCC * r) residual mean s) modified mean t) e treme mean u) none of the above +2) Gor a given year if an ad9usted seasonal inde is 7 122 then for some other period it is

v) w) ) y)

P 122 7 122 ! 122 none of the above

:2) 8resent ;alue is defined as@ A4 Guture cash flows discounted to the present at an appropriate discount rate B4 Inverse of future cash flows C4 8resent cash flow compounded into the future D4 =one of the above

:6) If the interest rate is 1)B, what is the 2 year discount factor? A4 2*-)+1 B4 2*/+1C4 1*322) D4 2*+)/

:9) 3n annuity is defined as A4 O'ual cash flows at e'ual intervals of time forever B4 O'ual cash flows at e'ual intervals of time for a specific period C4 Sne'ual cash flows at e'ual intervals of time forever D4 =one of the above

::) If the present value of the cash flow Q is Hs*222, and the present value cash of the flow : is Hs*1)2, than the present value of the combined cash flow is@ A4 222 B4 1)2 C4 )2

D4 3)2 E4 =one of the above

:;) What is the present value annuity due factor of He*1at a discount rate of 1)B for 1) years? A4 )*/$-$ B4 /*)1$ C4 /*13 D4 -*222

:<) 3n investment at 12B nominal rate compounded monthly is e'ual to an annual rate of@ A4 12*+/B B4 12*3+B C4 12B D4 =one of the above

:3)

3 )6year Tovt* bond with a compound rate of /B has a face value of 1222* What is the annual interest payment? A4 /2 B4 $2 C4 122 D4 =one of the above

;7) If the present value of Hs*$$$ to be paid at the end of one year isHs* $22, what is the one year discount factor? A4 2*121 B4 1*11

C4 2*11 D4 =one of the above

;1)

If you invest Hs*122,222 today at 12B interest rate for one year, what is the amount you will have at the end of the year? A4 Hs*12,121 B4 Hs*112,222 C4 Hs*122,222 D4 =one of the above