# Economics And Finance Quiz Questions!

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| By Vineetjain2005
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Vineetjain2005
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Everybody loves money, right? Whether you’re a business owner, a producer of various goods, someone who works a full-time retail job, or you happen to own land that you rent out for a profit, you already partake in the social science of economics on a daily basis – you just don’t know it yet! Learn all about finances and economics in the following quiz and see what you can learn!

• 1.

### What is the term used when your savings bank passbook has got a closing debit balance?

• A.

Float

• B.

Underdraft

• C.

Overdraft

• D.

Positive Balance

C. Overdraft
Explanation
A debit balance is actually a negative balance meaning you actually owe the bank that much money

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• 2.

### According to the famous Modgilani - Miller, which of the following would be the most preferred choice of financing for a firm which wants to raise funds?

• A.

Debt

• B.

Equity

• C.

Internal Equity

• D.

All eqully preffered

D. All eqully preffered
Explanation
Modgilani Miller state that the mode of financing has no bearing on the value of the firm

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• 3.

### What is the IRR (Internal Rate of return) for the following cash flows: Initially : Give out 100 bucks End of 1st year : Get 100 bucks End of 2nd Year: Get 11 bucks

• A.

11%

• B.

1.1%

• C.

11.11%

• D.

10%

D. 10%
Explanation
The IRR (Internal Rate of Return) is the rate at which the net present value (NPV) of cash flows equals zero. In this case, the initial cash outflow of 100 bucks is followed by two cash inflows of 100 bucks and 11 bucks at the end of the first and second years, respectively. To calculate the IRR, we need to find the discount rate that makes the NPV equal to zero. By trial and error, it can be determined that a discount rate of 10% results in an NPV close to zero. Therefore, the IRR for these cash flows is 10%.

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• 4.

### Which of the following term is used to state the condition of the firm when it tries to finance its long term assets by shot term liabilities or vice versa

• A.

Asset Liability Mismatch

• B.

Ledger Book mismatch

• C.

Short term - Long term mismatch

• D.

A. Asset Liability Mismatch
Explanation
Asset Liability Mismatch refers to the condition of a firm when it attempts to finance its long-term assets using short-term liabilities or vice versa. This mismatch occurs when there is a mismatch between the maturity and cash flow characteristics of a firm's assets and liabilities. It can lead to financial instability and liquidity problems for the firm if not managed properly.

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• 5.

### Which of the following ratios is related to the amount of capital a bank must have in order to cover the various credit risk it has?

• A.

Capital Turnover Ratio

• B.

Capital Employed Ratio

• C.

• D.

Asset Turnover Ratio