SEC-CISI Diploma Practice Questions - SEC-CISI Diploma in Capital Markets - Sri Lanka Exam - SEC-CISI Diploma Practice Questions - SEC-CISI Diploma in Capital Markets

Question 1

Which of the following capital budgeting techniques is considered the most theoretically sound for evaluating mutually exclusive projects because it directly measures shareholder wealth creation?

Internal Rate of Return (IRR) Net Present Value (NPV) Discounted Payback Period Accounting Rate of Return (ARR)

Correct Answer:

Net Present Value (NPV)

Question 2

A Sri Lankan corporate plans to calculate its Weighted Average Cost of Capital (WACC). The company has 70% equity and 30% debt. The cost of equity is 16%, the pre-tax cost of debt is 12%, and the corporate tax rate in Sri Lanka is 30%. What is the firm's WACC?

14.80% 13.72% 12.90% 13.12%

Correct Answer:

13.72%

Question 3

Which of the following statements best describes the Pecking Order Theory of capital structure?

Firms seek an optimal target debt-to-equity ratio by balancing tax shield benefits against bankruptcy costs. Firms prioritize their sources of financing, preferring internal funds first, followed by debt, and finally issuing new equity as a last resort. Modigliani-Miller theorems apply perfectly, meaning the method of financing has no impact on firm value. Firms prefer to issue equity when their shares are overvalued by the stock market to capture a pricing premium.

Correct Answer:

Firms prioritize their sources of financing, preferring internal funds first, followed by debt, and finally issuing new equity as a last resort.

Question 4

A stock currently pays an annual dividend of Rs. 15.00. The dividends are expected to grow at a constant rate of 6% per annum indefinitely. If the required rate of return for investors is 11%, what is the intrinsic value of the stock using the Gordon Growth Model?

Rs. 300.00 Rs. 318.00 Rs. 272.73 Rs. 136.36

Correct Answer:

Rs. 318.00

Question 5

What is the key difference between a Rights Issue and a Capitalization (Bonus) Issue for a company listed on the Colombo Stock Exchange?

A Rights Issue increases the company's total equity capital by raising new cash, whereas a Capitalization Issue only reorganizes reserves into share capital without generating cash. A Rights Issue is offered to non-shareholders, while a Capitalization Issue is offered exclusively to existing shareholders. A Rights Issue does not dilute the share price, while a Capitalization Issue significantly dilutes the voting power of major shareholders. A Rights Issue is a non-discretionary corporate action, while a Capitalization Issue requires approval from the Central Bank of Sri Lanka.

Correct Answer:

A Rights Issue increases the company's total equity capital by raising new cash, whereas a Capitalization Issue only reorganizes reserves into share capital without generating cash.

Question 1

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Prepare with the SEC-CISI Diploma Practice Questions - SEC-CISI Diploma in Capital Markets - Sri Lanka Exam practice quiz. This question bank includes 100 questions covering portfolio, market, rate, corporate, and bond. Use it to review important concepts, identify knowledge gaps, and build confidence for the related exam, course, or assessment.

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SEC-CISI Diploma Practice Questions - SEC-CISI Diploma in Capital Markets - Sri Lanka Exam

This practice set contains 100 questions from the matching question bank and focuses on portfolio, market, rate, corporate, and bond. Work through each question carefully, review the provided solutions, and revisit topics that need more study before your next attempt.

This is an independent study resource intended for practice and review; it is not an official examination or an endorsement by any organization named in the title.

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SEC-CISI Diploma Practice Questions - SEC-CISI Diploma in Capital Markets - Sri Lanka Exam

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