Question 1

Money markets are markets for

Accepted Answer

A)  Foreign stocks. 
B)  Consumer automobile loans. 
C)  U.S. stocks. 
D)  Short-term debt securities. 
E)  Long-term bonds. 
A)  Foreign stocks. 
B)  Consumer automobile loans. 
C)  U.S. stocks. 
D)  Short-term debt securities. 
E)  Long-term bonds.

Question 2

Which of the following statements is CORRECT?

Accepted Answer

A)  In a regular partnership, liability for other partners' misdeeds is limited to the amount of a particular partner's investment in the business. 
B)  Attracting large amounts of capital is more difficult for partnerships than for corporations because of such factors as unlimited liability, the need to reorganize when a partner dies, and the illiquidity (difficulty buying and selling) of partnership interests. 
C)  A slow-growth company, with little need for new capital, would be more likely to organize as a corporation than would a faster growing company. 
D)  The limited partners in a limited partnership have voting control, while the general partner has operating control over the business. Also, the limited partners are individually responsible, on a pro rata basis, for the firm's debts in the event of bankruptcy. 
E)  A major disadvantage of all partnerships compared to all corporations is the fact that federal income taxes must be paid by the partners rather than by the firm itself. 
A)  In a regular partnership, liability for other partners' misdeeds is limited to the amount of a particular partner's investment in the business. 
B)  Attracting large amounts of capital is more difficult for partnerships than for corporations because of such factors as unlimited liability, the need to reorganize when a partner dies, and the illiquidity (difficulty buying and selling) of partnership interests. 
C)  A slow-growth company, with little need for new capital, would be more likely to organize as a corporation than would a faster growing company. 
D)  The limited partners in a limited partnership have voting control, while the general partner has operating control over the business. Also, the limited partners are individually responsible, on a pro rata basis, for the firm's debts in the event of bankruptcy. 
E)  A major disadvantage of all partnerships compared to all corporations is the fact that federal income taxes must be paid by the partners rather than by the firm itself.

Question 3

a firm's goal is to maximize its earnings per share, this is the best way to maximize the price of the common stock and thus shareholders' wealth.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following statements is NOT CORRECT?

Accepted Answer

A)  When a corporation's shares are owned by a few individuals and are not traded on public markets, we say that the firm is "closely, or privately, held." 
B)  "Going public" establishes a firm's true intrinsic value, and it also insures that a highly liquid market will always exist for the firm's shares. 
C)  When stock in a closely held corporation is offered to the public for the first time, the transaction is called "going public," and the market for such stock is called the new issue market. 
D)  Publicly owned companies have shares owned by investors who are not associated with management, and public companies must register with and report to a regulatory agency such as the SEC. 
E)  It is possible for a firm to go public and yet not raise any additional new capital at the time. 
A)  When a corporation's shares are owned by a few individuals and are not traded on public markets, we say that the firm is "closely, or privately, held." 
B)  "Going public" establishes a firm's true intrinsic value, and it also insures that a highly liquid market will always exist for the firm's shares. 
C)  When stock in a closely held corporation is offered to the public for the first time, the transaction is called "going public," and the market for such stock is called the new issue market. 
D)  Publicly owned companies have shares owned by investors who are not associated with management, and public companies must register with and report to a regulatory agency such as the SEC. 
E)  It is possible for a firm to go public and yet not raise any additional new capital at the time.

Question 5

Which of the following statements is CORRECT?

Accepted Answer

A)  Corporations are at a disadvantage relative to partnerships because they have to file more reports to state and federal agencies, including the Securities and Exchange Administration, even if they are not publicly owned. 
B)  In a regular partnership, liability for the firm's debts is limited to the amount a particular partner has invested in the business. 
C)  A fast-growth company would be more likely to set up as a partnership for its business organization than would a slow-growth company. 
D)  Partnerships have difficulty attracting capital in part because of their unlimited liability, the lack of impermanence of the organization, and difficulty in transferring ownership. 
E)  A major disadvantage of a partnership relative to a corporation as a form of business organization is the high cost and practical difficulty of its formation. 
A)  Corporations are at a disadvantage relative to partnerships because they have to file more reports to state and federal agencies, including the Securities and Exchange Administration, even if they are not publicly owned. 
B)  In a regular partnership, liability for the firm's debts is limited to the amount a particular partner has invested in the business. 
C)  A fast-growth company would be more likely to set up as a partnership for its business organization than would a slow-growth company. 
D)  Partnerships have difficulty attracting capital in part because of their unlimited liability, the lack of impermanence of the organization, and difficulty in transferring ownership. 
E)  A major disadvantage of a partnership relative to a corporation as a form of business organization is the high cost and practical difficulty of its formation.

Question 6

Firm A's business is to obtain savings from individuals and then invest them in financial assets issued by other firms or individuals, Firm A is a financial intermediary.

Accepted Answer

A) True 
 B)False

Question 7

major advantage of a regular partnership or a corporation as a form of business organization is the fact that both offer their owners limited liability, whereas proprietorships do not.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following statements is CORRECT?

Accepted Answer

A)  One of the disadvantages of incorporating a business is that the owners then become subject to liabilities in the event the firm goes bankrupt. 
B)  Sole proprietorships are subject to more regulations than corporations. 
C)  In any type of partnership, every partner has the same rights, privileges, and liability exposure as every other partner. 
D)  Sole proprietorships and partnerships generally have a tax advantage over many corporations, especially large ones. 
E)  Corporations of all types are subject to the corporate income tax. 
A)  One of the disadvantages of incorporating a business is that the owners then become subject to liabilities in the event the firm goes bankrupt. 
B)  Sole proprietorships are subject to more regulations than corporations. 
C)  In any type of partnership, every partner has the same rights, privileges, and liability exposure as every other partner. 
D)  Sole proprietorships and partnerships generally have a tax advantage over many corporations, especially large ones. 
E)  Corporations of all types are subject to the corporate income tax.

Question 9

Which of the following is a primary market transaction?

Accepted Answer

A)  You sell 200 shares of Johnson & Johnson stock on the NYSE through your broker. 
B)  Johnson & Johnson issues 2,000,000 shares of new stock and sells them to the public through an investment banker. 
C)  You buy 200 shares of Johnson & Johnson stock from your younger brother. You just give him cash and he gives you the stock--the trade is not made through a broker. 
D)  One financial institution buys 200,000 shares of Johnson & Johnson stock from another institution. An investment banker arranges the transaction. 
E)  You invest $10,000 in a mutual fund, which then uses the money to buy $10,000 of Johnson & Johnson shares on the NYSE. 
A)  You sell 200 shares of Johnson & Johnson stock on the NYSE through your broker. 
B)  Johnson & Johnson issues 2,000,000 shares of new stock and sells them to the public through an investment banker. 
C)  You buy 200 shares of Johnson & Johnson stock from your younger brother. You just give him cash and he gives you the stock--the trade is not made through a broker. 
D)  One financial institution buys 200,000 shares of Johnson & Johnson stock from another institution. An investment banker arranges the transaction. 
E)  You invest $10,000 in a mutual fund, which then uses the money to buy $10,000 of Johnson & Johnson shares on the NYSE.

Question 10

Which of the following would be most likely to lead to higher interest rates on all debt securities in the economy?

Accepted Answer

A)  Households start saving a larger percentage of their income. 
B)  The economy moves from a boom to a recession. 
C)  The level of inflation begins to decline. 
D)  Corporations step up their expansion plans and thus increase their demand for capital. 
E)  The Federal Reserve uses monetary policy in an attempt to stimulate the economy. 
A)  Households start saving a larger percentage of their income. 
B)  The economy moves from a boom to a recession. 
C)  The level of inflation begins to decline. 
D)  Corporations step up their expansion plans and thus increase their demand for capital. 
E)  The Federal Reserve uses monetary policy in an attempt to stimulate the economy.

Question 11

Which of the following statements is CORRECT?

Accepted Answer

A)  It is usually easier to transfer ownership in a corporation than it is to transfer ownership in a sole proprietorship. 
B)  Corporate shareholders are exposed to unlimited liability. 
C)  Corporations generally face fewer regulations than sole proprietorships. 
D)  Corporate shareholders are exposed to unlimited liability, and this factor may be compounded by the tax disadvantages of incorporation. 
E)  Shareholders in a regular corporation (not an S corporation) pay higher taxes than owners of an otherwise identical proprietorship. 
A)  It is usually easier to transfer ownership in a corporation than it is to transfer ownership in a sole proprietorship. 
B)  Corporate shareholders are exposed to unlimited liability. 
C)  Corporations generally face fewer regulations than sole proprietorships. 
D)  Corporate shareholders are exposed to unlimited liability, and this factor may be compounded by the tax disadvantages of incorporation. 
E)  Shareholders in a regular corporation (not an S corporation) pay higher taxes than owners of an otherwise identical proprietorship.

Question 12

Which of the following could explain why a business might choose to operate as a corporation rather than as a sole proprietorship or a partnership?

Accepted Answer

A)  Corporations generally find it relatively difficult to raise large amounts of capital. 
B)  Less of a corporation's income is generally subjected to taxes than would be true if the firm were a partnership. 
C)  Corporate shareholders escape liability for the firm's debts, but this factor may be offset by the tax disadvantages of the corporate form of organization. 
D)  Corporate investors are exposed to unlimited liability. 
E)  Corporations generally face relatively few regulations. 
A)  Corporations generally find it relatively difficult to raise large amounts of capital. 
B)  Less of a corporation's income is generally subjected to taxes than would be true if the firm were a partnership. 
C)  Corporate shareholders escape liability for the firm's debts, but this factor may be offset by the tax disadvantages of the corporate form of organization. 
D)  Corporate investors are exposed to unlimited liability. 
E)  Corporations generally face relatively few regulations.

Question 13

recently sold 100 shares of your new company, XYZ Corporation, to your brother at a family reunion At the reunion your brother gave you a check for the stock and you gave your brother the stock certificates Which of the following statements best describes this transaction?

Accepted Answer

A)  This is an example of an exchange of physical assets. 
B)  This is an example of a primary market transaction. 
C)  This is an example of a direct transfer of capital. 
D)  This is an example of a money market transaction. 
E)  This is an example of a derivatives market transaction 
A)  This is an example of an exchange of physical assets. 
B)  This is an example of a primary market transaction. 
C)  This is an example of a direct transfer of capital. 
D)  This is an example of a money market transaction. 
E)  This is an example of a derivatives market transaction

Question 14

Suppose the U.STreasury announces plans to issue $50 billion of new bonds Assuming the announcement was not expected, what effect, other things held constant, would that have on bond prices and interest rates?

Accepted Answer

A)  Prices and interest rates would both rise. 
B)  Prices would rise and interest rates would decline. 
C)  Prices and interest rates would both decline. 
D)  There would be no changes in either prices or interest rates. 
E)  Prices would decline and interest rates would rise. 
A)  Prices and interest rates would both rise. 
B)  Prices would rise and interest rates would decline. 
C)  Prices and interest rates would both decline. 
D)  There would be no changes in either prices or interest rates. 
E)  Prices would decline and interest rates would rise.

Question 15

Cheers Incoperates as a partnership Now the partners have decided to convert the business into a regular corporationWhich of the following statements is CORRECT?

Accepted Answer

A)  Assuming Cheers is profitable, less of its income will be subject to federal income taxes. 
B)  Cheers will now be subject to fewer regulations. 
C)  Cheers' shareholders (the ex-partners) will now be exposed to less liability. 
D)  Cheers' investors will be exposed to less liability, but they will find it more difficult to transfer their ownership. 
E)  Cheers will find it more difficult to raise additional capital. 
A)  Assuming Cheers is profitable, less of its income will be subject to federal income taxes. 
B)  Cheers will now be subject to fewer regulations. 
C)  Cheers' shareholders (the ex-partners) will now be exposed to less liability. 
D)  Cheers' investors will be exposed to less liability, but they will find it more difficult to transfer their ownership. 
E)  Cheers will find it more difficult to raise additional capital.

Question 16

Which of the following statements is CORRECT?

Accepted Answer

A)  If expected inflation increases, interest rates are likely to increase. 
B)  If individuals in general increase the percentage of their income that they save, interest rates are likely to increase. 
C)  If companies have fewer good investment opportunities, interest rates are likely to increase. 
D)  Interest rates on all debt securities tend to rise during recessions because recessions increase the possibility of bankruptcy, hence the riskiness of all debt securities. 
E)  Interest rates on long-term bonds are more volatile than rates on short-term debt securities like T-bills. 
A)  If expected inflation increases, interest rates are likely to increase. 
B)  If individuals in general increase the percentage of their income that they save, interest rates are likely to increase. 
C)  If companies have fewer good investment opportunities, interest rates are likely to increase. 
D)  Interest rates on all debt securities tend to rise during recessions because recessions increase the possibility of bankruptcy, hence the riskiness of all debt securities. 
E)  Interest rates on long-term bonds are more volatile than rates on short-term debt securities like T-bills.

Money markets are markets for

Which of the following statements is CORRECT?

a firm's goal is to maximize its earnings per share, this is the best way to maximize the price of the common stock and thus shareholders' wealth.

Which of the following statements is NOT CORRECT?

Which of the following statements is CORRECT?

Firm A's business is to obtain savings from individuals and then invest them in financial assets issued by other firms or individuals, Firm A is a financial intermediary.

major advantage of a regular partnership or a corporation as a form of business organization is the fact that both offer their owners limited liability, whereas proprietorships do not.

Which of the following statements is CORRECT?

Which of the following is a primary market transaction?

Which of the following would be most likely to lead to higher interest rates on all debt securities in the economy?

Which of the following statements is CORRECT?

Which of the following could explain why a business might choose to operate as a corporation rather than as a sole proprietorship or a partnership?

recently sold 100 shares of your new company, XYZ Corporation, to your brother at a family reunion At the reunion your brother gave you a check for the stock and you gave your brother the stock certificates Which of the following statements best describes this transaction?

Suppose the U.STreasury announces plans to issue $50 billion of new bonds Assuming the announcement was not expected, what effect, other things held constant, would that have on bond prices and interest rates?

Cheers Incoperates as a partnership Now the partners have decided to convert the business into a regular corporationWhich of the following statements is CORRECT?

Which of the following statements is CORRECT?

Risk and Return: Part I

Risk and Return: Part II

Bonds

Stocks

Financial Options

Financial Analysis

Forecasting

Cost of Capital

Corporate Valuation

Capital Budgeting

Cash Flows and Risk

Real Options

Cap Structure

Cap Structure II

Dividends

Ipos, Invsmt Banking

Leasing

Hybrids

Working Capital

Derivatives

Bankruptcy, Reorganization, and Liquidation

Mergers

Filters

Exam 1: Overview

Money markets are markets for

Which of the following statements is CORRECT?

a firm's goal is to maximize its earnings per share, this is the best way to maximize the price of the common stock and thus shareholders' wealth.

Which of the following statements is NOT CORRECT?

Which of the following statements is CORRECT?

Firm A's business is to obtain savings from individuals and then invest them in financial assets issued by other firms or individuals, Firm A is a financial intermediary.

major advantage of a regular partnership or a corporation as a form of business organization is the fact that both offer their owners limited liability, whereas proprietorships do not.

Which of the following statements is CORRECT?

Which of the following is a primary market transaction?

Which of the following would be most likely to lead to higher interest rates on all debt securities in the economy?

Which of the following statements is CORRECT?

Which of the following could explain why a business might choose to operate as a corporation rather than as a sole proprietorship or a partnership?

recently sold 100 shares of your new company, XYZ Corporation, to your brother at a family reunion At the reunion your brother gave you a check for the stock and you gave your brother the stock certificates Which of the following statements best describes this transaction?

Suppose the U.STreasury announces plans to issue $50 billion of new bonds Assuming the announcement was not expected, what effect, other things held constant, would that have on bond prices and interest rates?

Cheers Incoperates as a partnership Now the partners have decided to convert the business into a regular corporationWhich of the following statements is CORRECT?

Which of the following statements is CORRECT?

Risk and Return: Part I

Risk and Return: Part II

Bonds

Stocks

Financial Options

Financial Analysis

Forecasting

Cost of Capital

Corporate Valuation

Capital Budgeting

Cash Flows and Risk

Real Options

Cap Structure

Cap Structure II

Dividends

Ipos, Invsmt Banking

Leasing

Hybrids

Working Capital

Derivatives

Bankruptcy, Reorganization, and Liquidation

Mergers

Filters