Question 1

Stock prices start to rise

Accepted Answer

A)  when investors are confident that the economy is more than 6 months into an economic recovery. 
B)  when investors begin to expect an economic recovery will soon begin. 
C)  when investors believe an economic recovery has already begun. 
D)  when the unemployment rate begins to decline following a recession. 
A)  when investors are confident that the economy is more than 6 months into an economic recovery. 
B)  when investors begin to expect an economic recovery will soon begin. 
C)  when investors believe an economic recovery has already begun. 
D)  when the unemployment rate begins to decline following a recession.

Question 2

The Sarbanes-Oxley Act of 2002 requires that each member of the board of directors personally certify the accuracy of financial reports.

Accepted Answer

A) True 
 B)False

Question 3

Included on the board of directors of Microsoft are John W.Stanton,the chairman of Trilogy Equity Partners,the executive president and chief financial officer of Gap,Inc.Teri L.List-Stoll,and the former vice chairman of Bank of America Charles H.Noski.These three board members do not have a direct management role with Microsoft and are therefore referred to as

Accepted Answer

A)  inside directors. 
B)  outside directors. 
C)  competitive directors. 
D)  honorary directors. 
A)  inside directors. 
B)  outside directors. 
C)  competitive directors. 
D)  honorary directors.

Question 4

Generally with bond ratings,the ________ the rating,the lower the interest rate an investor will receive and the ________ the risk that the issuer of the bond will default.

Accepted Answer

A)  higher; higher 
B)  higher; lower 
C)  lower; higher 
D)  lower; lower 
A)  higher; higher 
B)  higher; lower 
C)  lower; higher 
D)  lower; lower

Question 5

If a corporate bond with a face value of $5,000 pays yearly coupon payments of $100,what is the coupon rate?

Accepted Answer

A)  2% 
B)  5% 
C)  10% 
D)  20% 
A)  2% 
B)  5% 
C)  10% 
D)  20%

Question 6

Stocks represent partial ownership of a firm.

Accepted Answer

A) True 
 B)False

Question 7

A member of a corporate board of directors who is also a manager of the business is known as

Accepted Answer

A)  a shareholder. 
B)  an inside director. 
C)  a partner. 
D)  a corporate governor. 
A)  a shareholder. 
B)  an inside director. 
C)  a partner. 
D)  a corporate governor.

Question 8

When someone takes out a mortgage loan to buy a house,the mortgage lender can take possession of the house and sell it if the borrower defaults on the loan because the house is being pledged as ________ for the loan.

Accepted Answer

A)  goodwill 
B)  a liability 
C)  insurance 
D)  collateral 
A)  goodwill 
B)  a liability 
C)  insurance 
D)  collateral

Question 9

How do the owners of a partnership relate to the business?

Accepted Answer

A)  The owners and the business are not separate legal entities. 
B)  The owners and the business are separate legal entities. 
C)  The assets of the owners are considered separate from the asset of the business. 
D)  None of these describe the legal relationship of the owners to the business. 
A)  The owners and the business are not separate legal entities. 
B)  The owners and the business are separate legal entities. 
C)  The assets of the owners are considered separate from the asset of the business. 
D)  None of these describe the legal relationship of the owners to the business.

Question 10

If a corporation earns a profit,how do owners of the firm share in the profit?

Accepted Answer

A)  through coupon payments on that firm's bonds 
B)  through dividend payments on shares of that firm's stock 
C)  by selling any bonds or stocks owned and realizing a capital gain 
D)  by raising the interest rate on bonds 
A)  through coupon payments on that firm's bonds 
B)  through dividend payments on shares of that firm's stock 
C)  by selling any bonds or stocks owned and realizing a capital gain 
D)  by raising the interest rate on bonds

Question 11

The only type of business that faces unlimited liability is a corporation.

Accepted Answer

A) True 
 B)False

Question 12

When mortgage loans are securitized,they are

Accepted Answer

A)  bundled together by financial institutions and sold to investors. 
B)  issued to borrowers with flawed credit histories. 
C)  issued to borrowers who fail to document their income. 
D)  guaranteed by the federal government. 
A)  bundled together by financial institutions and sold to investors. 
B)  issued to borrowers with flawed credit histories. 
C)  issued to borrowers who fail to document their income. 
D)  guaranteed by the federal government.

Question 13

A corporation is the type of business that has ________ government rules and regulations affecting it.

Accepted Answer

A)  no 
B)  the fewest 
C)  the most 
D)  only federal 
A)  no 
B)  the fewest 
C)  the most 
D)  only federal

Question 14

Pietro is a manager at a carwash.He has hired 10 workers to wash and detail cars for him and is considering what type of payment scheme he should set up for his workers.He can pay each of his workers $9 per hour to wash and detail cars,or he can pay his workers $12 for each car a worker washes and details.(It takes 75 minutes,on average,for an employee to wash and detail a car.)If Pietro wants to maximize the number of cars his workers wash and detail in one day,which payment scheme should he use? Explain.

Accepted Answer

If Pietro wants to maximize the number o

Question 15

A financial security that represents a promise to repay a fixed amount of funds is a

Accepted Answer

A)  share of stock. 
B)  coupon. 
C)  dividend. 
D)  bond. 
A)  share of stock. 
B)  coupon. 
C)  dividend. 
D)  bond.

Question 16

How do a partnership and a corporation differ?

Accepted Answer

A)  Partnerships have unlimited liability while corporations have limited liability. 
B)  Corporations can issue stocks and bonds, while partnerships cannot. 
C)  Corporations face more taxes than do partnerships. 
D)  All of these are differences between the two types of businesses. 
A)  Partnerships have unlimited liability while corporations have limited liability. 
B)  Corporations can issue stocks and bonds, while partnerships cannot. 
C)  Corporations face more taxes than do partnerships. 
D)  All of these are differences between the two types of businesses.

Question 17

Which of the following takes place in the direct finance market?

Accepted Answer

A)  Firms borrow funds from their retained earnings. 
B)  Borrowers take out loans from banks. 
C)  Loans to corporations are made from the sale of corporate bonds. 
D)  Savers make funds available to borrowers by making deposits to savings accounts. 
A)  Firms borrow funds from their retained earnings. 
B)  Borrowers take out loans from banks. 
C)  Loans to corporations are made from the sale of corporate bonds. 
D)  Savers make funds available to borrowers by making deposits to savings accounts.

Question 18

When groups of mortgages are bundled together by financial institutions and sold to investors,these institutions are said to be ________ mortgage loans.

Accepted Answer

A)  securitizing 
B)  underwriting 
C)  liquidating 
D)  harvesting 
A)  securitizing 
B)  underwriting 
C)  liquidating 
D)  harvesting

Question 19

Which of the following is a characteristic of a bond?

Accepted Answer

A)  A bond represents a promise to repay a fixed amount of funds. 
B)  The face value or principal plus interest is repaid at a specified period of time. 
C)  The length of coupon payments is fixed by the stated maturity period. 
D)  All of these are characteristics of bonds. 
A)  A bond represents a promise to repay a fixed amount of funds. 
B)  The face value or principal plus interest is repaid at a specified period of time. 
C)  The length of coupon payments is fixed by the stated maturity period. 
D)  All of these are characteristics of bonds.

Question 20

Which type of business is the most difficult to set up?

Accepted Answer

A)  sole proprietorship 
B)  partnership 
C)  corporation 
D)  There is no difference in the difficulty of establishment. 
A)  sole proprietorship 
B)  partnership 
C)  corporation 
D)  There is no difference in the difficulty of establishment.

Stock prices start to rise

The Sarbanes-Oxley Act of 2002 requires that each member of the board of directors personally certify the accuracy of financial reports.

Generally with bond ratings,the the rating,the lower the interest rate an investor will receive and the the risk that the issuer of the bond will default.

If a corporate bond with a face value of $5,000 pays yearly coupon payments of $100,what is the coupon rate?

Stocks represent partial ownership of a firm.

A member of a corporate board of directors who is also a manager of the business is known as

When someone takes out a mortgage loan to buy a house,the mortgage lender can take possession of the house and sell it if the borrower defaults on the loan because the house is being pledged as ________ for the loan.

How do the owners of a partnership relate to the business?

If a corporation earns a profit,how do owners of the firm share in the profit?

The only type of business that faces unlimited liability is a corporation.

When mortgage loans are securitized,they are

A corporation is the type of business that has ________ government rules and regulations affecting it.

A financial security that represents a promise to repay a fixed amount of funds is a

How do a partnership and a corporation differ?

Which of the following takes place in the direct finance market?

When groups of mortgages are bundled together by financial institutions and sold to investors,these institutions are said to be ________ mortgage loans.

Which of the following is a characteristic of a bond?

Which type of business is the most difficult to set up?

Economics: Foundations and Models

Trade-Offs, Comparative Advantage, and the Market System

Where Prices Come From: The Interaction of Demand and Supply

Market Efficiency and Market Failure

The Economics of Health Care

Consumer Choice and Elasticity

Technology,Production,and Costs

Firms in Perfectly Competitive Markets

Monopoly and Antitrust Policy

Monopolistic Competition and Oligopoly

GDP: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, The Financial System, and Business Cycles

Aggregate Demand and Aggregate Supply Analysis

Money,Banks,and the Federal Reserve System

Monetary Policy

Fiscal Policy

Comparative Advantage, International Trade, and Exchange Rates

Filters

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

Stock prices start to rise

The Sarbanes-Oxley Act of 2002 requires that each member of the board of directors personally certify the accuracy of financial reports.

Generally with bond ratings,the ________ the rating,the lower the interest rate an investor will receive and the ________ the risk that the issuer of the bond will default.

If a corporate bond with a face value of $5,000 pays yearly coupon payments of $100,what is the coupon rate?

Stocks represent partial ownership of a firm.

A member of a corporate board of directors who is also a manager of the business is known as

When someone takes out a mortgage loan to buy a house,the mortgage lender can take possession of the house and sell it if the borrower defaults on the loan because the house is being pledged as ________ for the loan.

How do the owners of a partnership relate to the business?

If a corporation earns a profit,how do owners of the firm share in the profit?

The only type of business that faces unlimited liability is a corporation.

When mortgage loans are securitized,they are

A corporation is the type of business that has ________ government rules and regulations affecting it.

A financial security that represents a promise to repay a fixed amount of funds is a

How do a partnership and a corporation differ?

Which of the following takes place in the direct finance market?

When groups of mortgages are bundled together by financial institutions and sold to investors,these institutions are said to be ________ mortgage loans.

Which of the following is a characteristic of a bond?

Which type of business is the most difficult to set up?

Economics: Foundations and Models

Trade-Offs, Comparative Advantage, and the Market System

Where Prices Come From: The Interaction of Demand and Supply

Market Efficiency and Market Failure

The Economics of Health Care

Consumer Choice and Elasticity

Technology,Production,and Costs

Firms in Perfectly Competitive Markets

Monopoly and Antitrust Policy

Monopolistic Competition and Oligopoly

GDP: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, The Financial System, and Business Cycles

Aggregate Demand and Aggregate Supply Analysis

Money,Banks,and the Federal Reserve System

Monetary Policy

Fiscal Policy

Comparative Advantage, International Trade, and Exchange Rates

Filters

Generally with bond ratings,the the rating,the lower the interest rate an investor will receive and the the risk that the issuer of the bond will default.