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If the present value of future cash flows is $4,150 and the initial cost is $1,300, the profitability index (PI) is ____________?

The profitability index is calculated as: PI = Present Value of future cash flows ÷ Initial cost. So, PI = 4,150 ÷ 1,300 = 3.1923 ≈ 3.19. A PI greater than 1 indicates the project adds value.... Read More

1 FINANCE MCQS

If the present value of future cash flows is $4,150 and the initial cost is $1,300, the profitability index (PI) is ____________?

  • 0.0319
  • 5,450
  • 0.31 times
  • 3.19
Correct Answer: D. 3.19

Detailed Explanation

The profitability index is calculated as:
PI = Present Value of future cash flows ÷ Initial cost.
So, PI = 4,150 ÷ 1,300 = 3.1923 ≈ 3.19.
A PI greater than 1 indicates the project adds value.

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Finance MCQs
The stocks or shares sold to investors without using financial institutions are called ____________?
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Finance MCQs
The market where debt and stocks with a maturity period of more than one year are traded is called __________?
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Finance MCQs
The structured market where funds flow through financial instruments like bonds and stocks is called ____________?
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Finance MCQs
The financial market where corporations issue new securities to raise funds is called ____________?
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Finance MCQs
Savings banks, insurance companies, mutual funds, and commercial banks are examples of which type of institutions?
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Finance MCQs
Do debt instruments with which maturity face more price fluctuations?
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Finance MCQs
The centralized marketplace where agents can trade efficiently and quickly is called
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Finance MCQs
The major assets of commercial banks are:
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Finance MCQs
The type of markets in which derivative securities are traded is classified as:
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Finance MCQs
In the money markets, the excess supply of funds from agents is for:
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Finance MCQs
The type of financial security having payoffs linked to previously issued securities is called:
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Finance MCQs
The financial intermediaries that provide loans and accept short-term and long-term debts for funding are called:
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Finance MCQs
The risk which arises from all activities related to contingent liabilities and assets is called:
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Finance MCQs
The major liabilities of commercial banks are:
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Finance MCQs
In financial transactions, the risk that there will be no profit in selling an asset is classified as:
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Finance MCQs
The type of financial security which has a payoff linked to another issued security is classified as:
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Finance MCQs
The examples of derivative securities include:
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Finance MCQs
The risk that occurs due to a technology system failure is called:
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Finance MCQs
The legal document required by the Securities Exchange Commission that shows risks and details of an issue is called:
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Finance MCQs
Additional debt or equity instruments of a publicly traded company are issued in which market?
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Finance MCQs
Which of the following are financial instruments of public markets?
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Finance MCQs
The risk caused by changes in asset prices and exchange rates is called?
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Finance MCQs
Which institutions write securities, provide brokerage services, and trade in securities?
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Finance MCQs
Which institutions issue securities, handle brokerage, and trade in securities?
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Finance MCQs
Which term refers to the ability of an asset to be quickly converted into cash?
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Finance MCQs
Companies that collect money from individuals and businesses and invest it in a portfolio of assets are called __________?
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Finance MCQs
The risk that occurs when there is not enough capital to cover a sudden decrease in asset value is called __________?
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Finance MCQs
The market value of outstanding instruments in the capital market depends on __________?
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Finance MCQs
The depository institutions include __________?
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Finance MCQs
The market where governments issue securities to raise short-term funds is called __________?
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Finance MCQs
The risk where the value of assets and liabilities changes due to exchange rate fluctuations is called __________?
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Finance MCQs
The economic period when banks have excess funds is called __________?
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Finance MCQs
The accounting entry for institutions that borrow federal funds is recorded as __________?
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Finance MCQs
Commercial papers cannot be easily converted into cash due to lack of __________?
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Finance MCQs
Drafts that are backed by banks and payable to sellers of goods or services are called __________?
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Finance MCQs
Transactions that occur when borrowing and lending excess money are called __________?
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Finance MCQs
Which financial instrument is used to raise funds for working capital?
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Finance MCQs
The main investors of U.S. Treasury Bills do NOT include __________?
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Finance MCQs
Repurchase agreements (repos) can be traded __________?
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Finance MCQs
The Federal Reserve increases the money supply by __________?
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Finance MCQs
Negotiable certificates of deposit are traded in __________?
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Finance MCQs
In a security transaction, the agreement is called a “reverse repo” from the perspective of the __________?
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Finance MCQs
The interest rate on a certificate of deposit is quoted based on how many days in a year?
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Finance MCQs
In the borrowing and lending of federal funds, the federal funds rate is determined by the interaction of which two factors?
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Finance MCQs
Which financial instrument is used to raise funds for working capital?
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Finance MCQs
The demand for heavy loans can cause ____________?
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Finance MCQs
Investors usually hold commercial papers for __________?
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Finance MCQs
Markets that reallocate liquid funds in fixed amounts are called __________?
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Finance MCQs
CD rates are usually negotiated between __________?
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Finance MCQs
A commercial paper with a low interest rate indicates __________?
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Finance MCQs
The federal funds rate is determined by the interaction of __________?
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Finance MCQs
Which agreement involves selling a security with a promise to buy it back at maturity?
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Finance MCQs
Which instrument does the Federal Reserve use to manage money supply and interest rates?
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Finance MCQs
When an institution lends federal funds, it records them as __________?
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Finance MCQs
Negotiable certificates of deposit are issued by __________?
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Finance MCQs
The funds transferred usually for one day between financial institutions are classified as __________?
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Finance MCQs
Commercial paper can be sold __________?
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Finance MCQs
The banks that handle reciprocal agreements and accounts are called __________?
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Finance MCQs
The government regulates financial markets mainly to __________?
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Finance MCQs
Which document usually underlies an international banker’s acceptance?
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Finance MCQs
A negotiable certificate of deposit (with one-year maturity) pays interest __________?
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Finance MCQs
A banker’s acceptance, which is a time draft, is fully backed by ___________?
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Finance MCQs
Financial panic that causes large public losses can lead to ___________?
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Finance MCQs
The market where short-term financial instruments are traded is called __________?
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Finance MCQs
The transaction of federal funds usually takes place in the form of __________?
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Finance MCQs
The type of funds involving transfer transactions between financial institutions are called __________?
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Finance MCQs
Financial instruments are first traded in money markets and then in __________?
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Finance MCQs
The major investors in commercial papers include which of the following?
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Finance MCQs
The government issues treasury bills at a discounted rate from which value?
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Finance MCQs
Overnight loan transactions are part of which type of funds?
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Finance MCQs
The most flexible and liquid source of funding for savings banks is __________.
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Finance MCQs
The loan given to businesses or individuals to buy land, a home, or other property is called __________.
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Finance MCQs
Commercial mortgages, farm mortgages, and home mortgages are categories of?
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Finance MCQs
The mortgages taken to purchase townhouses and apartment complexes are called?
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Finance MCQs
The percentage change in bond price for a given change in interest rate is called __________.
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Finance MCQs
The duration divided by (1 + interest rate) is called ____________?
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Finance MCQs
The inverse relationship between bond price change and interest rate change is called?
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Finance MCQs
The situation where most of the investment money is borrowed from a broker is called __________.
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Finance MCQs
The upfront fee that a buyer must pay to the seller in an options contract is called __________.
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Finance MCQs
The main participants in the forward markets are __________.
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Finance MCQs
The type of index where current stock values are added together and divided by the stock value on the base date is called __________.
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Finance MCQs
The difference between the price of the underlying asset and the exercise price of an option is called __________.
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Finance MCQs
The traders who take positions in the futures market based on expected price changes of underlying assets are called __________.
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Finance MCQs
The underwriter spread of stock is added to net proceeds to calculate ___________?
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Finance MCQs
The underwriter spread is subtracted from gross proceeds to calculate __________.
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Finance MCQs
The prices adjusted daily to reflect current conditions of futures markets are called __________.
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Finance MCQs
Which type of contract involves exchange of assets in the future with prices settled daily?
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Finance MCQs
The process in which a group of investment banks distributes securities is called what?
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Finance MCQs
The pre-specified price at which an underlying asset can be bought or sold is called what?
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Finance MCQs
When the price of the underlying asset is added to the intrinsic value of an option, it gives what?
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Finance MCQs
The fixed price at which investment banks purchase stock from the issuer is called what?
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Finance MCQs
The period between the issuance of shares and the filing of registration with the Securities and Exchange Commission (SEC) is called what?
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Finance MCQs
The exchange members who place buy and sell orders from the public are called what?
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Finance MCQs
The orders executed at the best available price are called what?
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Finance MCQs
In a public corporation, the claim of fundamental ownership is called what?
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Finance MCQs
Which of the following is an example of a derivative security?
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Finance MCQs
The markets where derivatives are traded are called __________.
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Finance MCQs
Capital gain is subtracted from the return to stockholders to calculate __________.
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Finance MCQs
The unit that guarantees all buying and selling transactions made by traders on an exchange is called __________.
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Finance MCQs
The contract that gives the holder the right (but not the obligation) to buy or sell an asset within a specific time period is called __________.
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Finance MCQs
The composite value of a group of traded stocks in secondary markets is called __________.
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Finance MCQs
The difference between net proceeds and gross proceeds is called __________.
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Finance MCQs
The markets where corporations issue new securities to raise funds are called __________.
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Finance MCQs
The deposit required in a futures contract as a guarantee that the contract terms will be fulfilled is called ___________.
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Finance MCQs
The type of liability where stockholders can lose only the amount they invested in the firm is called __________.
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Finance MCQs
According to a futures contract, the long position means the __________.
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Finance MCQs
___________ is concerned with the acquisition, financing, and management of assets with an overall goal in mind.
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Finance MCQs
Financial management, while keeping an overall goal in mind, is mainly concerned with:
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Finance MCQs
The investment decision is the most important of a firm’s three major decisions because it relates to:
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Finance MCQs
Annual cash dividends divided by annual earnings, or alternatively, dividends per share divided by earnings per share, are termed as:
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Finance MCQs
Profit maximization refers to the maximization of a firm’s earnings:
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Finance MCQs
A major facet of financial management involves providing the financing necessary to support which of the following?
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