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Explanation

• A U.S. firm with €3 million payable in the future should buy a Call Option on Euro.
• The firm will need to buy euros in the future to make the payment.
• If the euro appreciates, the call option allows the firm to buy euros at the predetermined strike price.
• This protects the firm against an increase in the dollar cost of the euro payment.

Last verified on 14-08-2026

Explanation

Duration Gap = D_A - (L/A × D_L)

Here:

D_A = 5 years 

D_L = 2 years

A = 100 million

To get 3.4 years: 

3.4 = 5 - (L/100 × 2)  

(L/100 × 2) = 1.6  

L/100 = 0.8 → L = Rs. 80 million

So with Assets = 100m and Liabilities = 80m:  

Duration Gap = 5 - (80/100 × 2) = 5 - 1.6 = 3.4 years

Last verified on 14-08-2026

Explanation

Annual Coupon = 5% of 1000 = Rs. 50  

Market Price = Rs. 950

Approximate YTM = Annual Coupon / Market Price = 50 / 950 = 0.0526 = 5.26%

Last verified on 14-08-2026

Explanation

• Machine learning in financial analytics is mainly used for predicting trends and detecting patterns.
• It analyzes large amounts of financial data to identify patterns, relationships, and trends.
• It can support forecasting, risk assessment, fraud detection, and investment analysis.

Last verified on 14-08-2026

Explanation

• When a prepaid expense is recognized as an expense, the entry is: Expense A/C Dr. → Prepaid Expense A/C Cr.
• The Expense Account is debited because an expense is now recognized.
• The Prepaid Expense Account is credited because the prepaid asset decreases.

Last verified on 14-08-2026

Explanation

• Bank charges are not disclosed in the Bank Reconciliation Statement.
• Bank charges are recorded in the Cash Book when the business becomes aware of them.
• They are treated as an expense and therefore affect the Profit and Loss Account.
• The BRS is prepared only to reconcile differences between the Cash Book and Bank Statement.

Last verified on 14-08-2026

Explanation

• Capital gain divided by capital gain yield is used to determine the beginning or initial price.
• Capital gain is calculated as Ending Price − Beginning Price.
• Capital gain yield is calculated as Capital Gain ÷ Beginning Price.

Last verified on 13-08-2026

Explanation

• In accounting, an economic event occurs when a transaction is recorded.
• An economic event is a business occurrence that has a financial effect.
• It can change the company’s assets, liabilities, or owner's equity.
• Examples include sales, purchases, payments, and receipts.
• Recording the transaction allows the event to be reflected in the accounting records.

Last verified on 12-08-2026

Explanation

• The model that uses management, accounting, and econometrics is called a Management Science Model.
• Management science applies mathematical and analytical techniques to solve management problems.
• It uses quantitative information from areas such as management, accounting, and economics/econometrics.
• These models support planning, decision-making, and resource allocation.

Last verified on 12-08-2026

Explanation

• A Profitability Index (PI) of 0.9 means the project's NPV is negative, and the project should be rejected.
• The Profitability Index (PI) compares the present value of future cash inflows with the initial investment.
• PI > 1: NPV is positive → Accept the project.
• PI = 1: NPV is zero → Indifferent between accepting and rejecting.
• PI < 1: NPV is negative → Reject the project.

Last verified on 12-08-2026