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Your results are here!! for" JAIIB Paper 3 Module C (12) "
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Question 1 of 20
1. Question
What is generally the primary objective of financial management, subject to law and ethical responsibilities?
Correct
The traditional finance objective is to maximise shareholders‘ wealth, reflected in market value. It considers timing, risk and expected cash flows rather than accounting profit alone.
Incorrect
The traditional finance objective is to maximise shareholders‘ wealth, reflected in market value. It considers timing, risk and expected cash flows rather than accounting profit alone.
Unattempted
The traditional finance objective is to maximise shareholders‘ wealth, reflected in market value. It considers timing, risk and expected cash flows rather than accounting profit alone.
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Question 2 of 20
2. Question
An investment offers an expected return of 8% with relatively low risk, while another offers 13% with substantially higher risk. Which principle is illustrated?
Correct
Investors generally expect higher returns for accepting higher risk. Higher expected return does not guarantee higher realised return; suitability depends on risk tolerance and objectives.
Incorrect
Investors generally expect higher returns for accepting higher risk. Higher expected return does not guarantee higher realised return; suitability depends on risk tolerance and objectives.
Unattempted
Investors generally expect higher returns for accepting higher risk. Higher expected return does not guarantee higher realised return; suitability depends on risk tolerance and objectives.
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Question 3 of 20
3. Question
A company has current assets of â¹12 lakh and current liabilities of â¹8 lakh. What is its current ratio?
Correct
Current ratio = Current Assets ÷ Current Liabilities = â¹12 lakh ÷ â¹8 lakh = 1.5:1. The ratio measures short-term liquidity and should be interpreted with asset quality and operating-cycle information.
Incorrect
Current ratio = Current Assets ÷ Current Liabilities = â¹12 lakh ÷ â¹8 lakh = 1.5:1. The ratio measures short-term liquidity and should be interpreted with asset quality and operating-cycle information.
Unattempted
Current ratio = Current Assets ÷ Current Liabilities = â¹12 lakh ÷ â¹8 lakh = 1.5:1. The ratio measures short-term liquidity and should be interpreted with asset quality and operating-cycle information.
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Question 4 of 20
4. Question
A company has interest-bearing debt of â¹24 lakh and shareholders‘ equity of â¹16 lakh. Calculate debt divided by equity.
Correct
Debt-equity ratio = â¹24 lakh ÷ â¹16 lakh = 1.5:1. Higher leverage can increase financial risk because debt obligations must be met even if earnings fall.
Incorrect
Debt-equity ratio = â¹24 lakh ÷ â¹16 lakh = 1.5:1. Higher leverage can increase financial risk because debt obligations must be met even if earnings fall.
Unattempted
Debt-equity ratio = â¹24 lakh ÷ â¹16 lakh = 1.5:1. Higher leverage can increase financial risk because debt obligations must be met even if earnings fall.
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Question 5 of 20
5. Question
â¹50,000 is invested at 10% annually compounded for two years. What is the maturity amount before taxes and charges?
Correct
Amount = Principal à (1 + rate)^n = â¹50,000 à 1.10² = â¹60,500. Interest is â¹5,000 in year one and â¹5,500 in year two.
Incorrect
Amount = Principal à (1 + rate)^n = â¹50,000 à 1.10² = â¹60,500. Interest is â¹5,000 in year one and â¹5,500 in year two.
Unattempted
Amount = Principal à (1 + rate)^n = â¹50,000 à 1.10² = â¹60,500. Interest is â¹5,000 in year one and â¹5,500 in year two.
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Question 6 of 20
6. Question
An investor receives â¹10,000 at each year-end for three years. At a 10% annual discount rate, what is the approximate present value?
Correct
PV of ordinary annuity = PMT à [1 â (1+r)^(-n)] ÷ r. The annuity factor is about 2.4869, so PV â â¹24,869.
Incorrect
PV of ordinary annuity = PMT à [1 â (1+r)^(-n)] ÷ r. The annuity factor is about 2.4869, so PV â â¹24,869.
Unattempted
PV of ordinary annuity = PMT à [1 â (1+r)^(-n)] ÷ r. The annuity factor is about 2.4869, so PV â â¹24,869.
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Question 7 of 20
7. Question
A bond with face value â¹1,000 pays an annual coupon of 8% and costs â¹950. It redeems at face value after one year. What is its approximate yield to maturity?
Correct
The investor pays â¹950 and receives â¹80 coupon plus â¹1,000 redemption. Return = (â¹1,080 â â¹950) ÷ â¹950 à 100 â 13.68%. Under these one-year assumptions, this equals YTM.
Incorrect
The investor pays â¹950 and receives â¹80 coupon plus â¹1,000 redemption. Return = (â¹1,080 â â¹950) ÷ â¹950 à 100 â 13.68%. Under these one-year assumptions, this equals YTM.
Unattempted
The investor pays â¹950 and receives â¹80 coupon plus â¹1,000 redemption. Return = (â¹1,080 â â¹950) ÷ â¹950 à 100 â 13.68%. Under these one-year assumptions, this equals YTM.
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Question 8 of 20
8. Question
What generally happens to the market price of a fixed-coupon bond when prevailing market yields rise, all else equal?
Correct
Bond prices and market yields generally move inversely. When yields rise, existing fixed coupons are less attractive, so the bond price usually falls. The magnitude depends partly on duration and cash-flow structure.
Incorrect
Bond prices and market yields generally move inversely. When yields rise, existing fixed coupons are less attractive, so the bond price usually falls. The magnitude depends partly on duration and cash-flow structure.
Unattempted
Bond prices and market yields generally move inversely. When yields rise, existing fixed coupons are less attractive, so the bond price usually falls. The magnitude depends partly on duration and cash-flow structure.
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Question 9 of 20
9. Question
At â¹83.50 per US dollar, how many US dollars correspond to â¹1,67,000 before fees and spreads?
Correct
USD amount = â¹1,67,000 ÷ â¹83.50 = USD 2,000. Actual customer transactions may use the bank‘s applicable buying or selling rate rather than a mid-market rate.
Incorrect
USD amount = â¹1,67,000 ÷ â¹83.50 = USD 2,000. Actual customer transactions may use the bank‘s applicable buying or selling rate rather than a mid-market rate.
Unattempted
USD amount = â¹1,67,000 ÷ â¹83.50 = USD 2,000. Actual customer transactions may use the bank‘s applicable buying or selling rate rather than a mid-market rate.
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Question 10 of 20
10. Question
Spot is â¹84/USD. Annual interest rates are 6% in India and 4% in the US. Using simple interest, a 90-day period and a 360-day year, estimate the forward rate under covered interest parity.
Correct
Forward = Spot à (1 + INR rate à time)/(1 + USD rate à time) = 84 à 1.015/1.01 â â¹84.42/USD. It is a theoretical approximation and actual quotations may differ.
Incorrect
Forward = Spot à (1 + INR rate à time)/(1 + USD rate à time) = 84 à 1.015/1.01 â â¹84.42/USD. It is a theoretical approximation and actual quotations may differ.
Unattempted
Forward = Spot à (1 + INR rate à time)/(1 + USD rate à time) = 84 à 1.015/1.01 â â¹84.42/USD. It is a theoretical approximation and actual quotations may differ.
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Question 11 of 20
11. Question
A company has 60% equity at 14% cost and 40% debt at 8% pre-tax cost. Tax rate is 25%. What is WACC, assuming relevant market-value weights and deductible interest?
Correct
After-tax debt cost = 8% Ã (1 â 0.25) = 6%. WACC = 0.60 Ã 14% + 0.40 Ã 6% = 10.8%. This assumes the interest tax shield can be used.
Incorrect
After-tax debt cost = 8% Ã (1 â 0.25) = 6%. WACC = 0.60 Ã 14% + 0.40 Ã 6% = 10.8%. This assumes the interest tax shield can be used.
Unattempted
After-tax debt cost = 8% Ã (1 â 0.25) = 6%. WACC = 0.60 Ã 14% + 0.40 Ã 6% = 10.8%. This assumes the interest tax shield can be used.
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Question 12 of 20
12. Question
EBIT is â¹10 lakh and annual interest is â¹2 lakh. Ignoring taxes and preference dividends, what is the degree of financial leverage?
Correct
DFL = EBIT ÷ (EBIT â Interest) = 10 ÷ 8 = 1.25. Around this operating level, a 1% EBIT change corresponds approximately to a 1.25% change in earnings available to equity before tax.
Incorrect
DFL = EBIT ÷ (EBIT â Interest) = 10 ÷ 8 = 1.25. Around this operating level, a 1% EBIT change corresponds approximately to a 1.25% change in earnings available to equity before tax.
Unattempted
DFL = EBIT ÷ (EBIT â Interest) = 10 ÷ 8 = 1.25. Around this operating level, a 1% EBIT change corresponds approximately to a 1.25% change in earnings available to equity before tax.
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Question 13 of 20
13. Question
A project costs â¹1,00,000 and generates â¹60,000 at each of the next two year-ends. At a 10% discount rate, what is approximate NPV?
Correct
NPV = 60,000/1.10 + 60,000/1.10² â 1,00,000 â â¹54,545 + â¹49,587 â â¹1,00,000 = positive â¹4,132. A positive NPV generally indicates acceptance under the specified assumptions and discount rate.
Incorrect
NPV = 60,000/1.10 + 60,000/1.10² â 1,00,000 â â¹54,545 + â¹49,587 â â¹1,00,000 = positive â¹4,132. A positive NPV generally indicates acceptance under the specified assumptions and discount rate.
Unattempted
NPV = 60,000/1.10 + 60,000/1.10² â 1,00,000 â â¹54,545 + â¹49,587 â â¹1,00,000 = positive â¹4,132. A positive NPV generally indicates acceptance under the specified assumptions and discount rate.
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Question 14 of 20
14. Question
A project costs â¹2,40,000 and produces equal annual cash inflows of â¹60,000. Ignoring time value of money, what is the payback period?
Correct
Payback = Initial investment ÷ Annual cash inflow = â¹2,40,000 ÷ â¹60,000 = 4 years. This method ignores discounting and cash flows after payback.
Incorrect
Payback = Initial investment ÷ Annual cash inflow = â¹2,40,000 ÷ â¹60,000 = 4 years. This method ignores discounting and cash flows after payback.
Unattempted
Payback = Initial investment ÷ Annual cash inflow = â¹2,40,000 ÷ â¹60,000 = 4 years. This method ignores discounting and cash flows after payback.
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Question 15 of 20
15. Question
Which statement best distinguishes project appraisal from term-loan appraisal?
Correct
Project appraisal examines overall technical, commercial, financial and managerial viability. Term-loan appraisal assesses the proposed credit, repayment capacity, cash flows, security and credit risks. They are related but not identical.
Incorrect
Project appraisal examines overall technical, commercial, financial and managerial viability. Term-loan appraisal assesses the proposed credit, repayment capacity, cash flows, security and credit risks. They are related but not identical.
Unattempted
Project appraisal examines overall technical, commercial, financial and managerial viability. Term-loan appraisal assesses the proposed credit, repayment capacity, cash flows, security and credit risks. They are related but not identical.
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Question 16 of 20
16. Question
Which feature traditionally characterises a finance lease?
Correct
A finance lease traditionally transfers substantially all risks and rewards incidental to ownership to the lessee, even if legal title remains with the lessor. Actual accounting treatment must follow the applicable accounting framework.
Incorrect
A finance lease traditionally transfers substantially all risks and rewards incidental to ownership to the lessee, even if legal title remains with the lessor. Actual accounting treatment must follow the applicable accounting framework.
Unattempted
A finance lease traditionally transfers substantially all risks and rewards incidental to ownership to the lessee, even if legal title remains with the lessor. Actual accounting treatment must follow the applicable accounting framework.
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Question 17 of 20
17. Question
Inventory periods are 30 days for raw materials, 20 days for production and 25 days for finished goods. Receivables are 40 days and payables 35 days. What is the cash conversion cycle?
Correct
Inventory days = 30 + 20 + 25 = 75. Cash conversion cycle = inventory days + receivable days â payable days = 75 + 40 â 35 = 80 days.
Incorrect
Inventory days = 30 + 20 + 25 = 75. Cash conversion cycle = inventory days + receivable days â payable days = 75 + 40 â 35 = 80 days.
Unattempted
Inventory days = 30 + 20 + 25 = 75. Cash conversion cycle = inventory days + receivable days â payable days = 75 + 40 â 35 = 80 days.
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Question 18 of 20
18. Question
Current assets are â¹100 lakh and current liabilities other than bank borrowing are â¹20 lakh. Under the traditional second method, assuming minimum net working capital of 25% of current assets, what is simplified MPBF?
Correct
Required net working capital = 25% Ã â¹100 lakh = â¹25 lakh. MPBF = Current Assets â Other Current Liabilities â Required NWC = 100 â 20 â 25 = â¹55 lakh. This is a traditional textbook method, not a universal current lending limit.
Incorrect
Required net working capital = 25% Ã â¹100 lakh = â¹25 lakh. MPBF = Current Assets â Other Current Liabilities â Required NWC = 100 â 20 â 25 = â¹55 lakh. This is a traditional textbook method, not a universal current lending limit.
Unattempted
Required net working capital = 25% Ã â¹100 lakh = â¹25 lakh. MPBF = Current Assets â Other Current Liabilities â Required NWC = 100 â 20 â 25 = â¹55 lakh. This is a traditional textbook method, not a universal current lending limit.
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Question 19 of 20
19. Question
What is the primary purpose of a Forward Rate Agreement (FRA)?
Correct
An FRA is an OTC contract agreeing a rate for a future interest period on a notional principal. Settlement generally reflects the difference between contract and reference rates. It can hedge future interest-rate exposure, but counterparty and other risks remain.
Incorrect
An FRA is an OTC contract agreeing a rate for a future interest period on a notional principal. Settlement generally reflects the difference between contract and reference rates. It can hedge future interest-rate exposure, but counterparty and other risks remain.
Unattempted
An FRA is an OTC contract agreeing a rate for a future interest period on a notional principal. Settlement generally reflects the difference between contract and reference rates. It can hedge future interest-rate exposure, but counterparty and other risks remain.
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Question 20 of 20
20. Question
An investor buys a European call option and pays a premium. At expiry, the share price is below the exercise price. What happens, ignoring transaction costs?
Correct
A call gives the buyer the right but not the obligation to buy at the exercise price. If market price is below strike at expiry, exercising is uneconomic; the option expires unexercised and the buyer loses the premium paid.
Incorrect
A call gives the buyer the right but not the obligation to buy at the exercise price. If market price is below strike at expiry, exercising is uneconomic; the option expires unexercised and the buyer loses the premium paid.
Unattempted
A call gives the buyer the right but not the obligation to buy at the exercise price. If market price is below strike at expiry, exercising is uneconomic; the option expires unexercised and the buyer loses the premium paid.