NTA UGC NET/JRF Exam, Dec. 2020/June 2021 (Commerce) Shift-I

Total Questions: 100

51. The basic premise of the MM-approach is based on which of the following assumptions?

A. Asymmetrical information
B. Efficient capital markets
C. Investor rationality
D. Diverse business risk profile
E. 100% dividend payout ratio
Choose the correct answer from the options given below:

Correct Answer: (c) B, C and E only
Solution:

The basic premise of the MM approach is based on the following assumptins :
■ Efficient capital market
■ Investor capital market
■ 100% dividend payment ratio
Note : There is a perfect capital market when investors are free to buy and sell securities they can berrow funds without restriction at the same terms as the firms do, they behave rationally and there are no transaction costs.
■ Firms can be classified into homogenous risk classes : All the firms in the same risk class will have the same degree of financial risk.
■ All ivestors have the same expectation of a firms net operating income (EBIT)
■ The divided payout ratio is 100% which means there are no retained earning.

52. Given below are two statements, one is labelled as Assertion A and the other is labelled as Reason R

Assertion A: Two companies with the same general earning power and same general position in an industry, the one paying larger dividend will almost always sell at a higher price
Reason R: The discounted value of near dividends is higher than the present worth of distant dividends
In light of the above statements, choose the most appropriate answer from the options given below

Correct Answer: (c) Both A and R are correct and R is the correct explanation of A
Solution:Both A and R correct and R is the correct explanation of A.
Note : Graham and dodd Model (also known as the 'bird in hand approach')
■ Investors look to an immediate divided as 'a bird in hand' and at the distart dividend as 'two in the bush'. According to this theory shareholders are risk overse and prefer to receive dividends in the present time period rather than fiture capital gains.
■ The dividend discount model is used for predicting the price of a company's stock based on the theory that its present-day price is worth the sum of all of its future divided payments when discounted back to their present value

53. Which of the following order is followed in the issue of shares under the "Fixed Price Offer Method"?

A. Issue of a prospectus
 B. Receipt by the company of application for share
 C. Selection of merchant banker
D. Issue of share certificates
E. Allotment of shares to the applicant
 Choose the correct answer from the options given below

Correct Answer: (b) C, A, B, E, D
Solution:Following order is followed in the issue of shares under the "fixed price offer method" :■ Selection of marchant bankar
■ Issue of a prospectus
■ Receipt by the company of application for share
■ Allotment of shares to the applicant
■ Issue of share certificates
■ Under fixed price offer method the company going public (the process of selling shares) determines a fixed price at which its shares are offered to investors. The investors know the share price before the company goes public. Demand from the market is only known once the issue is closed.

54. Which one of the following vehicles is used when traffic building is the consumer promotion objective?

Correct Answer: (d) Special events
Solution:

Special events
■ Companies used 'Special events' as their promotional strategy to build consumer traffic.
■ In Special events, companies used to demonstrate their latest products and services, brands through memorable experiences.
■ Some other traffic building vehicles are Annual sales, festival sales, Retail, Coupons.

55. Which market form leads to more technological change and product improvements than alternative forms of market structure?

Correct Answer: (c) Oligopoly
Solution:

Oligopoly leads to more technological change and product improvements than alternative forms of market structure.
■ The perfect examples of Oligopoly market are markets for automobiles, airlines, telecom, mass media, which needs technological change and product improvements continiously to get improvement in thier services & products.

56. In Banking Technologies, Star Topology involves:

Correct Answer: (c) Each node is joined to the central node by a separate medium
Solution:

Each node is joined to the central node by a separate medium.
■ In Banking technologies, star topology is used to case the probabilities of network failure by connecting all of the systems to control node. The star topology allows each machine on the network to have a point to point connection to the central hub and there is no single point of failure.

57. When the sum of exponents exceeds one (a + b > 1) in the Cobb - Douglas production function, it causes which one of the following?

Correct Answer: (c) Increasing returns to scale
Solution:

Increasing returns to scale.

■ When the sum of exponent excedsone (a +b > 1) in cobb-Douglas production function, it couses increasing returns to scale.

Properties of cobb-Douglas production function

■ Homogeneous of Degree
■ If (a + b) > 1, increasing return to scale (IRS)
■ If (a + b) = 1, constant return to scale (CRS)
■ If (a + b) < 1, decreasing return to scale (DRS)
(a + b) = 1, it is linearly homogeneous of degree one :

58. Arrange the following levels of economic integration, from least integrated to the most integrated

A. Customs Union
B. Free Trade Area
C. Economic Union
D. Common Market
E. Political Union
Choose the correct answer from the options given below

Correct Answer: (b) B, A, D, C, E
Solution:

Levels of economic integration from least integrated to the most integrated
■ Free Trade Area
■ Customs Union
■ Common Market
■ Economic Union
■ Political Union
■ Economic integration is an agreement among nations to reduce or eliminate trade barriers and agree on fiscal policies.
■ European Union is the perfect example of economic completely integral integration.

59. The partial integration of agricultural with non-agricultural income is done in case of:

Correct Answer: (a) AOP/BOI
Solution:

■ The partial integration of agricultural with non-agricultural income is done in case of AOP/BOI.

Key points :
■ The scheme of partial integration is applicable is :
(i) The taxpayer is an individual, a HUF, a body of individual, an association of persons or an artificial juridical person.
(ii) The taxpayer has non, agricultural income exceeding the amount of exemption limit.
(iii) The agricultural income of the taxpayer exceeds Rs. 5,000

60. Match List-I with List-II

List-I (Events)List-II (Year)
A. Bretton Woods ConferenceI. 1948
B. GATT establishedII. 1974
C. Multi-fibre AgreementIII. 1944
D. WTO replaced GATTIV. 1995

Choose the correct answer from the options given below :

ABCD
(a)IIIVIIII
(b)IIIIIIIV
(c)IIIIIVII
(d)IVIIIIII
Correct Answer: (b)
Solution:

Match the list-I & List-II

List-I (Events)List-II (Years)
A.Bretton woods ConferenceIII.1944
B.GATT establishedI.1948
C.Multi-fibre AgreementII.1974
D.WTO replaced GATTIV.1995