MS MS in Finance

Question 1

What does the Capital Asset Pricing Model (CAPM) primarily describe?

Accepted Answer

The relationship between systematic risk and expected return of an asset

Answer

The optimal capital structure between debt and equity

Answer

The pricing of options based on underlying volatility

Answer

The calculation of a firm's weighted average cost of capital

Question 2

What is the 'time value of money' principle?

Accepted Answer

A dollar received today is worth more than a dollar received in the future

Answer

Interest rates always increase over time

Answer

Future cash flows are more certain than present ones

Answer

Inflation always erodes the value of saved money at a fixed rate

Question 3

Which financial statement shows a company's revenues, expenses, and profits over a period?

Accepted Answer

Income statement

Answer

Balance sheet

Answer

Cash flow statement

Answer

Statement of shareholders' equity

Question 4

What does 'beta' measure in portfolio theory?

Accepted Answer

A stock's sensitivity to market-wide movements (systematic risk)

Answer

The total risk of a portfolio including diversifiable risk

Answer

The ratio of a company's debt to equity

Answer

The excess return per unit of total risk

Question 5

What is a 'derivative' in financial markets?

Accepted Answer

A financial contract whose value is derived from an underlying asset

Answer

A bond issued by a government entity

Answer

A stock that pays consistent dividends

Answer

A mutual fund tracking a market index

Question 6

Which concept describes the rate of return at which the net present value of a project's cash flows equals zero?

Accepted Answer

Internal Rate of Return (IRR)

Answer

Payback period

Answer

Profitability index

Answer

Return on equity