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JAIIB AFM Unit 25 — Capital Investment Decisions - Term Loans: Free MCQs with Explanations

By Swarnakshi Jha (ex-banker) · Updated 20 September 2026 · Paper 3 of the November 2026 cycle (28 November 2026)

This page is a free slice of our JAIIB AFM question bank for Unit 25 — Capital Investment Decisions - Term Loans (Module C — Financial Management). The Mock Centre holds 19 questions on this unit alone, every one with a why-right / why-wrong explanation; below are the facts examiners keep returning to, five of those questions to try, and the traps that cost marks.

AFM · Module C19 MCQs in the Mock Centre5 free belowPaper on 28 November 2026

Key facts examiners test from this unit

  1. DCF methods = NPV and IRR (time-value based); non-DCF = payback and ARR.
  2. Investment analysis uses CASH FLOWS (not accounting profit), incremental and after-tax.
  3. NPV = PV of inflows − investment (2,563.82 − 2,000 = 563.82); accept if NPV > 0; among mutually exclusive projects pick the HIGHEST NPV.

5 free practice questions — tap an option

Five basic questions from this unit. Answers lock on the first tap, exactly as in the exam, and a short explanation opens underneath. The Mock Centre adds the moderate and tough questions, why every other option is wrong, the concept capsule and the exam tip — with your score and revision dates tracked.

Question 1 of 5
The discounted cash-flow (DCF) methods of capital budgeting are:
Why (b): NPV and IRR are the DCF pair — both discount future cash flows.
Question 2 of 5
Which is correct about cash flows in investment decisions?
Why (c): Appraisal runs on CASH FLOWS carrying TIME VALUE — a rupee next year is worth less than one today, hence discounting.
Question 3 of 5
When the NPV is positive, the project should be:
Why (b): NPV > 0 → the project earns more than the cost of capital → ACCEPT; the excess is value added to shareholders.
Question 4 of 5
The payback period tells:
Why (b): Payback = the years for cumulative inflows to RECOVER the outlay — a liquidity/risk screen.
Question 5 of 5
The ARR is based on:
Why (b): ARR rests on ACCOUNTING PROFIT (after depreciation) — its central weakness versus cash-flow-based DCF methods.
0 of 5 answered.

Traps in this unit

Confusable AConfusable BThe difference
NPVIRRAbsolute rupees added vs the project's own % rate
DCF methodsNon-DCF methodsNPV/IRR (time value) vs payback/ARR
Practise all 19 questions on Unit 25. The free demo opens a slice of every subject with the same explanations; the AFM Online-only pass unlocks all 1,681 AFM questions, the full and module mocks, Smart Revision and the Readiness Score for one year (₹1,299). Not sure where you stand? Take the free 10-question test first.
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Independent study aid — not affiliated with, endorsed by, or sponsored by the Indian Institute of Banking & Finance (IIBF). Exam pattern, dates, fees and passing criteria are set by IIBF — always confirm the current rules at iibf.org.in. Regulatory figures verified as of September 2026; verify from official sources before relying on them in practice.