Business Finance Mod 1
What is the formula for calculating compound interest?
- A) P(1 + r/n)^(nt)
- B) P(1 - r/n)^(nt)
- C) P(1 + rt/n)
- D) P(1 - rt/n)
A
Which financial ratio measures a company's ability to meet its short-term obligations?
- A) Return on Investment (ROI)
- B) Debt-to-Equity Ratio
- C) Current Ratio
- D) Price-to-Earnings (P/E) Ratio
C
In the context of investments, what does the Sharpe ratio assess?
- A) Market liquidity
- B) Portfolio risk-adjusted return
- C) Stock volatility
- D) Debt coverage ratio
B
Which statistical measure provides a snapshot of the spread or dispersion of a set of values?
- A) Mean
- B) Median
- C) Variance
- D) Standard Deviation
D
What is the primary purpose of the Capital Asset Pricing Model (CAPM) in finance?
- A) Evaluate a company's creditworthiness
- B) Estimate the cost of debt
- C) Assess the risk and return of an investment
- D) Analyze market liquidity
C
In bond pricing, what does the yield to maturity (YTM) represent?
- A) Current market value of the bond
- B) Annual interest payment
- C) Total return anticipated on the bond if held until it matures
- D) Face value of the bond
C
What is the purpose of the Monte Carlo simulation in financial modeling?
- A) Estimate future cash flows
- B) Assess investment risk through multiple scenarios
- C) Determine the optimal stock price
- D) Calculate present value
B
Which type of risk is associated with the variability of returns caused by changes in interest rates?
- A) Market risk
- B) Credit risk
- C) Interest rate risk
- D) Operational risk
C
What does the efficient frontier represent in portfolio theory?
- A) The optimal mix of assets that maximizes return for a given level of risk
- B) The total market value of a company's outstanding shares
- C) The ratio of debt to equity in a company
- D) The rate of return on an investment
A
Which financial concept is measured by beta in the context of investments?
- A) Market risk
- B) Inflation risk
- C) Liquidity risk
- D) Credit risk
A