Economics MCQs and Answers: Economics are very important for OPSC, OSSC, OSSSC & Other State Exams. Aspirants who are willing to apply for the various Government exams in 2022 must go through the topics of Economics for competitive exams, as Economics is a key part of the syllabus.
Economics MCQs
Q1. The mixture of debt and equity, used to finance a corporation is also known as
(A) capital structure
(B) capital budgeting
(C) investing
(D) treasury
Q2. The present value of $100 expected in two years from today at a discount rate of 5% is
(A) $105
(B) $110.7
(C) $95
(D) $90.7
Q3. What will be value of $100 after two years, if the interest rate during this period is 5%?
(A) $105
(B) $107.5
(C) $110.25
(D) $95
Q4. Investors require higher return on
(A) levered equity
(B) unlevered equity
(C) both levered and unlevered
(D) bond equity
Q5. In a well-functioning capital market if the firm pays no taxes then what is better about borrowing?
(A) Borrowing is not a good idea in this case
(B) No difference who (firm or shareholders) borrows
(C) It is better that the firm borrows
(D) It is better that the shareholders borrow
Q6. The risk that cannot be eliminated by diversification is called
(A) specific risk
(B) security risk
(C) market risk
(D) beta
Q7. Which from the following is the safest investment?
(A) Treasury bills
(B) Government bond
(C) Corporate bond
(D) Stocks
Q8. The spread of possible outcomes of an investment returns is measured by
(A) variance
(B) standard deviation
(C) skewness
(D) kurtosis
Q9. Risk is best judged in
(A) portfolio context
(B) individual security context
(C) both of these
(D) none of these
Q10. In a well-functioning markets two investments that offer the same payoff must have the same
(A) beta
(B) return
(C) risk
(D) price
Q11. Corporations can return cash to their shareholders by
(A) paying cash dividends
(B) stock repurchase
(C) both A and B
(D) none of these
Q12. Which from the following is true about stock repurchases?
(A) Repurchases are more flexible
(B) Repurchases are tax-advantaged
(C) both A and B
(D) none of these
Q13. What should be the goal of a Corporation?
(A) to maximize the profit of the shareholders
(B) to maximize the value of the corporation
(C) both A and B
(D) to take care of the interests of the management
Q14. The money an investor receive for taking on a risk is called
(A) risk premium
(B) risk free rate
(C) option value
(D) arbitrage
Q15. An asset that pays a fixed amount of cash each year for a specified number of years is called
(A) perpetuity
(B) dividend
(C) liquidity
(D) annuity
ANSWERS:
S1. Ans. (A) capital structure
Sol. The most crucial component of starting a business is capital. It acts as the foundation of the company. Debt and Equity are the two primary types of capital sources for a business. Capital structure is defined as the combination of equity and debt that is put into use by a company in order to finance the overall operations of the company and for its growth.
S2. Ans.(D) $90.7
Sol. As per the Forbes’ report, Mukesh Ambani’s total wealth at $ 90.7 billion has seen a jump of 7 percent from the last fiscal. Gautam Adani is placed on the second position with $90 billion wealth and HCL Technologies’ Shiv Nadar secured the third spot with $28.7 billion net worth
S3. Ans.(C) $110.25
Sol. An interest rate compounded more frequently tends to appear lower. For this reason, lenders often like to present interest rates compounded monthly instead of annually. For example, a 6% mortgage interest rate amounts to a monthly 0.5% interest rate.
S4. Ans.(A) levered equity
Sol. The levered cost of equity represents the risk components of the financial structure of a firm. To finance the projects of a firm, companies often need to resort to debt that is collected from the market. The market offers the debt by the resources of the investors.
S5.Ans. (B) No difference who (firm or shareholders) borrows
Sol.A shareholder is any person, company, or institution that owns shares in a company’s stock. A company shareholder can hold as little as one share. Shareholders are subject to capital gains (or losses) and/or dividend payments as residual claimants on a firm’s profits.
S6. Ans.(C) market risk
Sol. Market risk is the risk of losses in positions arising from movements in market prices.: Equity risk, the risk that stock or stock indices (e.g. Euro Stoxx 50, etc. ) prices or their implied volatility will change.
S7. Ans.(A) Treasury bills
Sol. Treasury bills or T-bills are money market instruments and short term debt instruments issued by the Government of India and are presently issued in three tenors
S8.Ans. (B) standard deviation
Sol. The standard deviation is a statistic that measures the dispersion of a dataset relative to its mean and is calculated as the square root of the variance. It is calculated as the square root of variance by determining the variation between each data point relative to the mean.
S9. Ans.(A) portfolio context
Sol.A portfolio’s meaning can be defined as a collection of financial assets and investment tools that are held by an individual, a financial institution or an investment firm.
S10. Ans.(D) price
Sol. The amount of money given or set as consideration for the sale of a specified thing
S11. Ans.(C) both A and B
Sol.Companies do not always pay dividends in cash and may pay stock dividends. The shareholders may also be given a choice between cash and stock or permit the shareholders to buy additional shares with this dividend (dividend reinvestment plan) .
S12. Ans.(C) both A and B
Sol.Another benefit of share repurchases is the tax benefit you receive from the repurchases. When a company repurchases shares, those taxes are lower capital gains, as opposed to dividends, which are taxed as ordinary income when the dividends are received.
S13.Ans. (C) both A and B
Sol.We can say the value of a corporation is maximized when the price of a stock is increased. Value maximization is preferable for the owner because it ensures not only the capital gain by selling stock in the market but also get profit through a dividend.
S14. Ans.(A) Risk premium
Sol.The market risk premium is part of the Capital Asset Pricing Model (CAPM) which analysts and investors use to calculate the acceptable rate of return for an investment. At the center of the CAPM is the concept of risk (volatility of returns) and reward (rate of returns).
S15. Ans.(D) Annuity
Sol.An annuity is a contract between you and an insurance company in which you make a lump-sum payment or series of payments and, in return, receive regular disbursements, beginning either immediately or at some point in the future.
