Exam 6: Firms, the Stock Market, and Corporate Governance

Roderick received a $100 savings bond for his graduation.The bond pays $100 at maturity,which is in five years.If the interest rate is 6%,the bond has a present value of $90.09.

Organizing a successful firm in a market economy has become ________ over the last century.

Jeremy is thinking of starting up a small business selling NASCAR memorabilia.He is considering setting up his business as a sole proprietorship.What is one advantage to Jeremy of setting up his business as a sole proprietorship?

Compared to buying stock in a publicly-held firm,investing in a private firm

The existence of the principal-agent problem

What happens in the secondary market?

How is accounting profit found?

An explicit cost is

Which type of businesses earns the majority of profits in the United States?

What do the highest stock price and the lowest stock price over the previous year indicate?

What takes place in the indirect finance market?

Tanesha sells homemade candles over the Internet.Her annual revenue is $64,000 per year,the explicit costs of her business are $17,000,and the opportunity costs of her business are $22,000.What are the implicit costs of her business?

If a corporation goes bankrupt,which of the following has first claim on the firm's assets?

How are corporate profits taxed in the United States?

According to the article in the "An Inside Look" feature,Facebook is a

What is the Congressional act,enacted in 1933 and repealed in 1999,which prevented financial firms from being both commercial banks and investment banks?

Sole proprietorships are ________ type of business.

As a form of business,a partnership

Scott is a manager at a pool cleaning business.He has hired 10 workers to clean pools for him and is considering what type of payment scheme he should set up for his workers.He can pay each of his workers $10 per hour to clean pools,or he can pay his workers $20 for each pool a worker cleans.(It takes 2 hours,on average,for an employee to clean a pool thoroughly.)If Scott wants to maximize the number of pools his workers clean in one day,which payment scheme should he use? Explain.

If a stock's dividend is expected to grow at a constant rate of 6 percent in the future and it has just paid a dividend of $3.00 per share,and you have an alternative investment of equal risk that will earn a 9 percent rate of return,what would you be willing to pay per share for this stock?