1. Interest rate risk is a type of A) Credit risk B) Market risk C) Operational risk D) All the above 2.

Which of the following statement is correct? A) Foreign Exchange markets are localized markets. B) Foreign Exchange markets operate within a countrys time zone. C) Foreign Exchange markets are dynamic and round the clock markets. D) Foreign Exchange markets are used only for trade related transactions. 3. In the annual report, where would a financial statement reader find out if the companys financial statements give a fair depiction of its financial position and operating results? A) Notes to the financial statements B) Management discussion and analysis section C) Balance sheet D) Auditors report 4. Which accounting assumption assumes that an enterprise will continue in operation long enough to carry out its existing objectives and commitments? A) Monetary unit assumption B) Economic entity assumption C) Time period assumption D) Going concern assumption

5. The deferred income tax liability: A) Represents income tax payments that are deferred until future years because of temporary differences between GAAP rules and tax accounting rules. B) Is a contingent liability. C) Can result in a deferred income tax asset. D) Is recorded whether or not the difference between taxable income and financial accounting Income is permanent or temporary. 6. A measure of profitability is the A) Current ratio. B) Debt to total assets ratio. C) Return on assets ratio. D) Working capital.

7. The difference between the balance of a plant asset account and the related accumulated depreciation account is termed a. Market value. b. Contra asset. c. Book value. d. Liability.

8. Which of the following is not an activity listed in the statement of cash flows? a. Investing Activities b. Funding Activities c. Operating Activities d. Financing Activities 9. Which of the following is an example of a deferral? a. Accruing year-end wages b. Recognizing revenues earned but not yet recorded c. Recording prepaid rent d. Recognizing expenses incurred but not yet recorded

10. Deciding whether to record a sale when the order for services is received or when the services are performed is an example of a a. Classification issue. b. Valuation issue. c. Recognition issue. d. Communication issue. 11. If you have caused an accident, which type of automobile insurance would cover damage to your own car? a. Collision b. Comprehensive c. Term d. Liability 12. Inflation can cause difficulty in many ways. Which group would have the greatest problem during periods of inflation? a. Young couples with no children who both work b. Young working couples with children c. Older working couples saving for retirement d. Older people living on fixed retirement income 13. The joint probability of events A and B is 32 percent with the probability of event A being 60 percent and the probability of event B being 50 percent. Based on this information, the conditional probability of event A given event B has occurred is closest to: A. 30.0%. B. 53.3%. C. 64.0%. D. 69.0% 14. If a firms long-run average cost of production increases by 15 percent as a result of an 8 percent increase in production the firm is most likely experiencing: A. Economies of scale. B. Diseconomies of scale. C. Constant returns to scale. D. Uncertainty in return

15. An analyst has calculated the following ratios for a company: Number of days of receivables 48 Number of days of inventory 37 Number of days of payables 28 the cash conversion cycle for the company is closest to: A. 57 days. B. 85 days. C. 113 days. D. 76 days 16. An analyst is developing net present value (NPV) profiles for two investment projects. The only difference between the two projects is that Project 1 is expected to receive larger cash flows early in the life of the project, while Project 2 is expected to receive larger cash flows late in the life of the project. The slope of the NPV profile for Project 1 when compared to the slope of the NPV profile for Project 2 is most likely: A. Equal. B. Flatter. C. Steeper. D. Cross 17. A companys $100 par perpetual preferred stock has a dividend rate of 7 percent and a required rate of return of 11 percent. The companys earnings are expected to grow at a constant rate of 3 percent per year. If the market price per share for the preferred stock is $75, the preferred stock is most appropriately described as being: A. Overvalued by $11.36. B. Undervalued by $15.13. C. Undervalued by $36.36. D. Overvalued by 10.30. 18. An equity analyst working for a growth oriented mutual fund has a tendency to mis value the stocks of popular companies that she has previously recommended and the fund already owns. Her behavior is most likely consistent with which of the following biases? A. Escalation bias B. Prospect theory C. Confirmation bias D. overconfidence bias, 19. Compared to investors with long investment time horizons, investors with short investment time horizons most likely require: A. Less liquidity and less emphasis on capital appreciation. B. More liquidity and less emphasis on capital appreciation. C. Less liquidity and greater emphasis on capital appreciation. D. More liquidity and greater emphasis on capital appreciation 20. A primary motivation for investment in commodities is most likely the: A. Positive correlation of commodities with unexpected inflation. B. Positive correlation of commodities with stock and bond investments. C. Positive volatility of commodities relative to stock and bond investments. D. Positive correlation and commodities relative to stock and bond investments.

21. Which of the following statements regarding the Markowitz efficient frontier is least likely to be correct? The optimal portfolio for: A. An investor is the portfolio that lies on the efficient frontier and provides her with the greatest level of utility. B. An investor is found at the point of tangency between the efficient frontier and an investors highest utility curve. C. A more risk-averse investor will lie inside the efficient frontier but will lie outside the efficient frontier for a less risk-averse investor. D. All the above 22. A forward sale can be replicated by: (a) Selling a put and buying a call. (b) Selling a foreign T-bill and buying a domestic T-bill. (c) Buying a put and selling a call. (d) Both b and c ` 23. A put can be replicated by: (a) Buying a call and selling foreign currency forward. (b) Buying a domestic T-bill, selling a foreign T-bill, and buying a call. (c) Both a and b (d) All of the above 24. The replication approach to valuing a call option means: (a) That the payoffs of the call and its underlying asset are always identical. (b) Buying forward a number of units of the underlying asset such that the payoffs of the option and the forward purchase are identical. (c) Buying forward a number of units of the underlying asset such that the payoffs of the option and the forward purchase are identical up to a known amount, which is then replicated in the money market. (d) Selling the call and buying forward a number of units of the underlying asset such that the payoffs are equal to zero. 25. The forward hedging approach to valuing a call option means: (a) Buying the call and selling forward a number of units of the underlying asset such that the payoffs are equal to the value of a domestic T-bill. (b) Buying forward a number of units of the underlying asset such that the payoffs of the option and the forward purchase are identical. (c) Buying the call and selling forward a number of units of the underlying asset such that the payoffs are identical. (d) Selling the call and buying forward a number of units of the underlying asset such that the payoffs are equal to zero. 26. Technical analysis: (a) Has been proven to be utterly useless as a way of predicting exchange rates. (b) Relies on statistical and econometric models rather than on trading rules. (c) Can only work when there is weak-form market efficiency. (d) Is none of the above.

27. Which of the following best describes the measures which have been taken to stop the practice known as creative accounting? (a) Creative accounting has been made a criminal offence. (b) The Companies Act forbids directors from engaging in creative accounting. (c) The Stock Exchange conditions of listing prohibit the practice. (d) The regulatory system has been altered and accounting standards have been changed to disCourage the practice. 28. Which of the following statements regarding the Chairmans report in an annual report is correct? (a) The report is required by the Companies Act. (b) The report is subject to an audit by the external auditors of the company. (c) Accounting standards define the format of the Chairmans report. (d) There are no controls over the format or content of the Chairmans report and it is not subject to statutory audit. 29. Which of the following factors is likely to be an area of difficulty in a large multinational group of Companies? (a) Compliance with international accounting standards. (b) Foreign currency translation. (c) The preparation of the group financial statements. (d) All of the above 30. A flexible budget is: (a) One where departmental functional managers are given discretion over the application of Spending limits. (b) One where the budget is permitted to alter to reflect changes in activity levels. (c) One where managers are given discretion as to the investigations which are carried out into Variances revealed by budgetary control reports. (d) One which allows departmental managers to design their own budgetary control reports. 31. Which of the following statements regarding marginal costing is incorrect? (a) It is a useful long-term planning technique. (b) It assumes that fixed costs remain fixed over relevant activity ranges. (c) It assumes that other costs vary in proportion to activity. (d) It assumes that costs can be classified as variable or fixed. 32. Which one of the following is not a technique used for capital investment appraisal? (a) The payback method. (b) The accounting rate of return method. (c) Discounted cash flow techniques. (d) Capital budgeting. 33. Positive economics (A) Does not depend on market interactions. (B) Only looks at the best parts of the economy. (C) examines how the economy actually works(as opposed to how it should work). (D) is very subjective.

34. The First Fundamental Theorem of Welfare Economics requires (A) Producers and consumers to be price takers. (B) That there is an efficient market for every commodity. (C) That the economy operates at some point on the utility possibility curve. (D) All of the above. 35. Markets in which funds are transferred from those who have excess funds available to those who have a shortage of available funds are called A) Commodity markets. B) Fund-available markets. C) Derivative exchange markets. D) Financial markets.

36. Economists group commercial banks, savings and loan associations, credit unions, mutual funds, mutual savings banks, insurance companies, pension funds, and finance companies together under the heading financial intermediaries. Financial intermediaries a) Act as middlemen, borrowing funds from those who have saved and lending these funds to others. b) Play an important role in determining the quantity of money in the economy. c) Help promote a more efficient and dynamic economy. d) Do all of the above. 37. Banks are important to the study of money and the economy because they A) Provide a channel for linking those who want to save with those who want to invest. B) Have been a source of rapid financial innovation that is expanding the alternatives available to those wanting to invest their money. C) Is the only financial institution to play a role in determining the quantity of money in the economy. D) Do only (A) and (B) of the above.

38. AS-17 (Accounting Standard) deals with A) Segmenting report B) Accounting for Amalgamation B) Depreciation accounting C) Financial instruments(Disclosures)

39. AS-11 (Accounting Standard) deals with A) Accounting for Amalgamation B) Accounting for Government Grants C) The effects of changes in Foreign Exchange Rates D) Consolidated financial statements

40. Competition commission Acts related to A) Mergers and acquisition, amalgamation. B) Film releasing C) Control the competition between Same industry business. D) Just like that every act is made to legal frame for commission agents.

Answers 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

B C D D A C C B C C A D C B A B A C B A

21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40

C D C C A D D D D B A D C D D D D A C A