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Corporate Finance · Quiz 1 · 26 Oct 2025 (Afternoon)

BSMS2205 · 25 questions · 100 marks · 60 min

Answer key Take as mock

Indian Institute of Technology Madras

BS Degree Programme · Examination & Study Paper

BSMS2205 · Corporate Finance

Quiz 1 · 26 Oct 2025 (Afternoon)

Official Paper

Examination Instructions & Guidelines

Solve on notebook/paper first before checking solutions.
MCQ: Exactly 1 option is correct. Negative marking applies.
Scientific calculator allowed for all calculations.
Official answer key is sealed at the end of this sheet.

Q1MCQ4 Marks·Choose one option
Key ↓
A zero-coupon bond with face value of Rs 5,000 matures in one year. Its price is Rs 4,500. What is the yield of the bond?
1. A8.42%
2. B10.00%
3. C11.11%
4. D9.00%
Q2MCQ4 Marks·Choose one option
Key ↓
If you want to double your money at 5% annual rate of interest, how many years will it take?
1. A
2. B
3. C
4. D
Q3MCQ4 Marks·Choose one option
Key ↓
You purchased an asset today for Rs 1,000. Suppose the asset earns an annual interest rate of 7% which is continuously compounded. What will be the value of the asset after 5 years (Rounded off to nearest integer)?
1. ARs 1350
2. BRs 1402
3. CRs 1419
4. DRs 1500
Q4MCQ4 Marks·Choose one option
Key ↓
Which rule helps an entrepreneur with limited capital get back invested money fastest in high interest environments?
1. ANPV
2. BPayback
3. CIRR
4. DProfitability Index
Q5MCQ4 Marks·Choose one option
Key ↓
If nominal GDP doubles, but real GDP remains unchanged, this means
1. AOnly prices increased.
2. BOnly quantity increased.
3. CBoth prices and quantity increased.
4. DNeither prices nor quantity increased.
Q6MCQ4 Marks·Choose one option
Key ↓
The PVC stock is trading at Rs 300 today. PVC is expected to pay a dividend of Rs 20 per share next year. If the growth rate of the PVC dividend is 3% every year and the appropriate rate of return is 10% per year, then according to the Gordon growth model
1. AThe PVC stock is underpriced, and an investor should buy PVC shares.
2. BThe PVC stock is overpriced, and an investor should buy PVC shares.
3. CThe PVC stock is underpriced, and an investor should sell PVC shares.
4. DThe PVC stock is overpriced, and an investor should sell PVC shares.
Q7MCQ4 Marks·Choose one option
Key ↓
A bond pays 200 units in 1 year and 200 units in 5 years. What is the (simple) duration of the bond?
1. A5 years
2. B3 years
3. C2.5 years
4. D1 year
Q8MCQ4 Marks·Choose one option
Key ↓
1. A0.008
2. B0.128
3. C0.200
4. D0.512
Q9MCQ4 Marks·Choose one option
Key ↓
If expected inflation equals nominal interest rate, then real interest rate is
1. APositive
2. BNegative
3. CZero
4. DOne
Q10MCQ4 Marks·Choose one option
Key ↓
An upward sloping yield curve shows:
1. AShort-term rates are higher than long-term rates.
2. BShort-term rates are lower than long-term rates.
3. CMaturity is irrelevant.
4. DIt is one of the indications of upcoming recession.
Q11MCQ4 Marks·Choose one option
Key ↓
Suppose there is a new project that demands an investment of Rs 10 lakh today and promises to pay off after two years. If the estimated internal rate of return of the project is 12%, then what amount is paid off on the payment date (after two years)?
1. ARs 12 lakh
2. BRs 12.400 lakh
3. CRs 12.544 lakh
4. DRs 12.838 lakh
Q12MCQ4 Marks·Choose one option
Key ↓
During the cleaning of house, you find an old sword that belonged to your grandfather. Your grandfather purchased the sword 60 years ago for Rs 60. You go to the market and find out that the current value of the sword is Rs 9,000. What is the annualized rate of return that the sword has earned?
1. A60%
2. B10.87%
3. C8.71%
4. D2.50%
Q13MCQ4 Marks·Choose one option
Key ↓
ABC Corporation is looking to invest in one new project, and they have three options: Project-A is expected to generate Rs 30 lakh after two years and Rs 40 lakh after 5 years; Project-B is expected to generate Rs 10 lakh each year for 6 years (beginning next year); Project-C is expected to generate Rs 100 lakh after 10 years. Each one of the project costs Rs 40 lakh today. The required rate of return on these projects is 10%. What is the profitability index of Project-B?
1. A1.09
2. B1.19
3. C1.88
4. D0.88
Q14MCQ4 Marks·Choose one option
Key ↓
ABC Corporation is looking to invest in one new project, and they have three options: Project-A is expected to generate Rs 30 lakh after two years and Rs 40 lakh after 5 years; Project-B is expected to generate Rs 10 lakh each year for 6 years (beginning next year); Project-C is expected to generate Rs 100 lakh after 10 years. Each one of the project costs Rs 40 lakh today. The required rate of return on these projects is 10%. Which one of the projects should ABC Corporation choose according to NPV criterion?
1. AProject-A
2. BProject-B
3. CProject-C
4. DNone of these
Q15MCQ4 Marks·Choose one option
Key ↓
Assume there are two periods and prices of consumption good are the same (and equal to 1) in both periods. You earn Rs 10,000 in period 1 and Rs 12,000 in period 2. In each of the two periods, your spending is equal to earnings in that period. The slope of intertemporal budget constraint is −1.12, then what is the prevailing interest rate?
1. A10%
2. B12%
3. C15%
4. DInsufficient information
Q16MCQ4 Marks·Choose one option
Key ↓
What is the present value of an annuity that pays Rs 1,000 for next 25 years (beginning next year) and faces a cost of capital of 5%? (Nearest integer value)
1. ARs 25,000
2. BRs 18,394
3. CRs 14,094
4. DRs 12,500
Q17MCQ4 Marks·Choose one option
Key ↓
A typical consumer basket in the economy of Pangia Island consists of 1 unit of clothes, 3 units of food and 2 units of fuel. In 2022, the price of clothes was Rs 200 per unit, the price of food was Rs 50 per unit and the price of fuel was Rs 75 per unit. In 2023, the price of clothes was Rs 180 per unit, the price of food was Rs 70 per unit and the price of fuel was Rs 80 per unit. In 2024, the price of clothes was Rs 220 per unit, the price of food was Rs 80 per unit and the price of fuel was Rs 100 per unit. Considering 2022 as base year, what was the CPI in 2024? (Note: CPI in base year =100)
1. A100
2. B110
3. C120
4. D132
Q18MCQ4 Marks·Choose one option
Key ↓
A typical consumer basket in the economy of Pangia Island consists of 1 unit of clothes, 3 units of food and 2 units of fuel. In 2022, the price of clothes was Rs 200 per unit, the price of food was Rs 50 per unit and the price of fuel was Rs 75 per unit. In 2023, the price of clothes was Rs 180 per unit, the price of food was Rs 70 per unit and the price of fuel was Rs 80 per unit. In 2024, the price of clothes was Rs 220 per unit, the price of food was Rs 80 per unit and the price of fuel was Rs 100 per unit. Considering 2022 as base year, what was the annual inflation rate in 2024 with respect to 2023?
1. A10%
2. B16%
3. C20%
4. D32%
Q19MCQ4 Marks·Choose one option
Key ↓
Manish runs a private school in his town. He wants to start a bus service for the students. He goes to the bank and asks for a loan of Rs 8,00,000. The bank official tells him that the loan will have a monthly interest rate of 3% for 10 years. What would be the equated monthly instalment (EMI) that he will be paying each month for the next 10 years, beginning next month (Round off to nearest integer)?
1. ARs 12,000
2. BRs 22,746
3. CRs 24,711
4. DRs 28,437
Q20MCQ4 Marks·Choose one option
Key ↓
Consider a 20-year zero-coupon bond that promises to pay 1000 units after 20 years. The annualized interest rate is 2.5%. Suppose due to geopolitical tensions, the prevailing interest rate increases by 10 basis points to 2.6%. What would be the change in the value of the bond?
1. Aincreases by 1.93%
2. Bdecreases by 1.93%
3. Cincreases by 1.20%
4. Ddecreases by 1.20%
Q21MCQ4 Marks·Choose one option
Key ↓
On investigating the Indian yield curve, you find that annualized rate on 1-year bond (expiring in September 2026) is 4% and the annualized rate on 2-year bond (expiring in September 2027) is 4.5%. What would be the 1-year interest rate from September 2026 to September 2027?
1. A4.28%
2. B4.50%
3. C4.72%
4. D5.00%
Q22MCQ4 Marks·Choose one option
Key ↓
In the economy of Moldova, the nominal GDP is accounted as 15,000 units and the real GDP is accounted as 12,000 units in 2024, then what is the value of GDP deflator in 2024 for Moldova?
1. A120
2. B125
3. C130
4. D150
Q23MCQ4 Marks·Choose one option
Key ↓
Which of the following is not a characteristic of a bond?
1. APromised fixed payments at specific time
2. BStream of payments is inversely proportional to interest rates
3. CThere may exist a risk of default from issuer
4. DOwnership claims on the profits
Q24MCQ4 Marks·Choose one option
Key ↓
For a simple perpetuity, its present value increases if
1. AFirst payment decreases
2. BDiscount rate increases
3. CPayments grow over time
4. DPayments are delayed over time
Q25MCQ4 Marks·Choose one option
Key ↓
Which of the following is a reason for preferring short-term bonds over long-term bonds?
1. AFaster ability to reinvest at new rates
2. BHigher exposure to interest rate changes
3. CHigher default risk
4. DLower coupon payments

Official Key

Master Answer Key & Explanations

Official answer keys from IIT Madras BS past papers. Click any question to review.

Reveal Key

Q1C

Q2A

Q3C

Q4B

Q5A

Q6D

Q7B

Q8C

Q9C

Q10B

Q11C

Q12C

Q13A

Q14A

Q15B

Q16C

Q17D

Q18C

Q19C

Q20B

Q21D

Q22B

Q23D

Q24C

Q25A

Questions and answer keys are reproduced from the official IIT Madras BS papers. BTechi is not affiliated with IIT Madras.