Question 1

In a typical year,________ new firms open in the United States.

Accepted Answer

A) more than 600,000 
B) more than 1 million 
C) less than 200,000 
D) approximately 125,000 
A) more than 600,000 
B) more than 1 million 
C) less than 200,000 
D) approximately 125,000

Question 2

If a corporate bond with face value of $5,000 has an interest rate of 4 percent paid once a year for a term of 30 years,what is the size of the coupon payment?

Accepted Answer

A) $4 
B) $200 
C) $1,250 
D) $5,000 
A) $4 
B) $200 
C) $1,250 
D) $5,000

Question 3

Indirect finance includes the sale by a corporation of stocks or bonds,but does not include borrowing money from a bank.

Accepted Answer

A) True 
 B)False

Question 4

If a corporation goes bankrupt,bondholders have ________ on the firm's assets.

Accepted Answer

A) no claim 
B) third claim,after the IRS and stockholders, 
C) second claim,after stockholders, 
D) first claim 
A) no claim 
B) third claim,after the IRS and stockholders, 
C) second claim,after stockholders, 
D) first claim

Question 5

Which type of business has the most government rules and regulations affecting it?

Accepted Answer

A) sole proprietorship 
B) partnership 
C) corporation 
D) They all have the same set of rules and regulations affecting them. 
A) sole proprietorship 
B) partnership 
C) corporation 
D) They all have the same set of rules and regulations affecting them.

Question 6

Donnie's Donuts incurs $450,000 per year in explicit costs and $200,000 in implicit costs.The bakery earns $800,000 in revenues and has $2 million in net worth.Based on this information,what is the accounting profit for Donnie's Donuts?

Accepted Answer

A) $150,000 
B) $350,000 
C) $600,000 
D) $1.2 million 
A) $150,000 
B) $350,000 
C) $600,000 
D) $1.2 million

Question 7

Mortgages issued to borrowers who fail to document that their incomes are high enough to afford their mortgage payments are known as ________ mortgages.

Accepted Answer

A) subprime 
B) Alt-A 
C) gray market 
D) reciprocal 
A) subprime 
B) Alt-A 
C) gray market 
D) reciprocal

Question 8

Seth's grandmother gave him a $50 savings bond for his birthday.The bond pays $50 at maturity,which is in five years.If the interest rate is 5%,the bond has a present value of $43.19.

Accepted Answer

A) True 
 B)False

Question 9

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

Accepted Answer

A) corporations 
B) partnerships 
C) sole proprietorships 
D) none of these 
A) corporations 
B) partnerships 
C) sole proprietorships 
D) none of these

Question 10

Which of the following would be considered an implicit cost of operating a business?

Accepted Answer

A) advertising expenses 
B) wages paid to workers 
C) a normal rate of return for investors 
D) any explicit cost 
A) advertising expenses 
B) wages paid to workers 
C) a normal rate of return for investors 
D) any explicit cost

Question 11

Who controls a partnership?

Accepted Answer

A) stockholders 
B) bondholders 
C) the owner s 
D) all of these 
A) stockholders 
B) bondholders 
C) the owner s 
D) all of these

Question 12

How is economic profit found?

Accepted Answer

Economic profits equ

Question 13

Define a corporation.

Accepted Answer

A corporation is a legal form

Question 14

Which of the following does not take place in the direct finance market?

Accepted Answer

A) Ownership in corporations is sold in the form of common stock. 
B) Deposits from savers are accumulated and loans made to borrowers. 
C) Ownership in corporations is sold in the form of preferred stock. 
D) Corporate bonds are sold to savers. 
A) Ownership in corporations is sold in the form of common stock. 
B) Deposits from savers are accumulated and loans made to borrowers. 
C) Ownership in corporations is sold in the form of preferred stock. 
D) Corporate bonds are sold to savers.

Question 15

A bond's coupon payment divided by the bond's current price is equal to the bond's

Accepted Answer

A) dividend yield. 
B) current yield. 
C) price-earnings ratio. 
D) maturity value. 
A) dividend yield. 
B) current yield. 
C) price-earnings ratio. 
D) maturity value.

Question 16

All of the following represent differences between stocks and bonds except

Accepted Answer

A) a stock can possibly pay dividends forever,but bonds have a fixed number of payments. 
B) differences of opinion about a stock's future may vary considerably but there is less difference about a bond's future. 
C) the future growth of a stock is more uncertain than the payments of a bond. 
D) bonds represent partial ownership in a firm but stocks do not. 
A) a stock can possibly pay dividends forever,but bonds have a fixed number of payments. 
B) differences of opinion about a stock's future may vary considerably but there is less difference about a bond's future. 
C) the future growth of a stock is more uncertain than the payments of a bond. 
D) bonds represent partial ownership in a firm but stocks do not.

Question 17

What happens in the primary market?

Accepted Answer

A) primary inputs like electricity are sold 
B) a corporate financial manager will resell previously issued shares of stock 
C) newly issued claims are sold by the borrowing firm to the initial buyer 
D) already issued claims are sold from one investor to another 
A) primary inputs like electricity are sold 
B) a corporate financial manager will resell previously issued shares of stock 
C) newly issued claims are sold by the borrowing firm to the initial buyer 
D) already issued claims are sold from one investor to another

Question 18

If a corporation retains all its profits and distributes none of the profit to owners,how can owners benefit?

Accepted Answer

A) If the retained earnings are expected to create future profits,the market price of the firm's stock will increase and create a capital gain for stockholders if the stock is sold. 
B) Shares of stock can be converted into bonds so stockholders will be able to earn coupon payments. 
C) Owners will only benefit if some profits are paid out in the form of dividends. 
D) Owners will benefit by changing the board of directors. 
A) If the retained earnings are expected to create future profits,the market price of the firm's stock will increase and create a capital gain for stockholders if the stock is sold. 
B) Shares of stock can be converted into bonds so stockholders will be able to earn coupon payments. 
C) Owners will only benefit if some profits are paid out in the form of dividends. 
D) Owners will benefit by changing the board of directors.

Question 19

Economists refer to the conflict between the interests of shareholders and the interests of top management as

Accepted Answer

A) a stock-equity problem. 
B) a liability problem. 
C) a principal-agent problem. 
D) a financial intermediary problem. 
A) a stock-equity problem. 
B) a liability problem. 
C) a principal-agent problem. 
D) a financial intermediary problem.

Question 20

When Zynga,the company behind the social games CityVille and Words With Friends,sold stock to the public for the first time in December 2011,funds were being raised in a ________ market,and when those newly issued shares are resold to other buyers,the sales take place in a ________ market.

Accepted Answer

A) primary; primary 
B) primary; secondary 
C) secondary; primary 
D) secondary; secondary 
A) primary; primary 
B) primary; secondary 
C) secondary; primary 
D) secondary; secondary

In a typical year,________ new firms open in the United States.

If a corporate bond with face value of $5,000 has an interest rate of 4 percent paid once a year for a term of 30 years,what is the size of the coupon payment?

Indirect finance includes the sale by a corporation of stocks or bonds,but does not include borrowing money from a bank.

If a corporation goes bankrupt,bondholders have ________ on the firm's assets.

Which type of business has the most government rules and regulations affecting it?

Donnie's Donuts incurs $450,000 per year in explicit costs and $200,000 in implicit costs.The bakery earns $800,000 in revenues and has $2 million in net worth.Based on this information,what is the accounting profit for Donnie's Donuts?

Mortgages issued to borrowers who fail to document that their incomes are high enough to afford their mortgage payments are known as ________ mortgages.

Seth's grandmother gave him a $50 savings bond for his birthday.The bond pays $50 at maturity,which is in five years.If the interest rate is 5%,the bond has a present value of $43.19.

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

Which of the following would be considered an implicit cost of operating a business?

Who controls a partnership?

How is economic profit found?

Define a corporation.

Which of the following does not take place in the direct finance market?

A bond's coupon payment divided by the bond's current price is equal to the bond's

All of the following represent differences between stocks and bonds except

What happens in the primary market?

If a corporation retains all its profits and distributes none of the profit to owners,how can owners benefit?

Economists refer to the conflict between the interests of shareholders and the interests of top management as

When Zynga,the company behind the social games CityVille and Words With Friends,sold stock to the public for the first time in December 2011,funds were being raised in a market,and when those newly issued shares are resold to other buyers,the sales take place in a market.

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency, government Price Setting, and Taxes

Externalities, environmental Policy, and Public Goods

Elasticity: the Responsiveness of Demand and Supply

The Economics of Health Care

Comparative Advantage and the Gains From International Trade

Consumer Choice and Behavioral Economics

Technology, production, and Costs

Firms in Perfectly Competitive Markets

Monopolistic Competition: the Competitive Model in a More Realistic Setting

Oligopoly: Firms in Less Competitive Markets

Monopoly and Antitrust Policy

Pricing Strategy

The Markets for Labor and Other Factors of Production

Public Choice, taxes, and the Distribution of Income

Filters

Exam 8: Firms, the Stock Market, and Corporate Governance

In a typical year,________ new firms open in the United States.

If a corporate bond with face value of $5,000 has an interest rate of 4 percent paid once a year for a term of 30 years,what is the size of the coupon payment?

Indirect finance includes the sale by a corporation of stocks or bonds,but does not include borrowing money from a bank.

If a corporation goes bankrupt,bondholders have ________ on the firm's assets.

Which type of business has the most government rules and regulations affecting it?

Donnie's Donuts incurs $450,000 per year in explicit costs and $200,000 in implicit costs.The bakery earns $800,000 in revenues and has $2 million in net worth.Based on this information,what is the accounting profit for Donnie's Donuts?

Mortgages issued to borrowers who fail to document that their incomes are high enough to afford their mortgage payments are known as ________ mortgages.

Seth's grandmother gave him a $50 savings bond for his birthday.The bond pays $50 at maturity,which is in five years.If the interest rate is 5%,the bond has a present value of $43.19.

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

Which of the following would be considered an implicit cost of operating a business?

Who controls a partnership?

How is economic profit found?

Define a corporation.

Which of the following does not take place in the direct finance market?

A bond's coupon payment divided by the bond's current price is equal to the bond's

All of the following represent differences between stocks and bonds except

What happens in the primary market?

If a corporation retains all its profits and distributes none of the profit to owners,how can owners benefit?

Economists refer to the conflict between the interests of shareholders and the interests of top management as

When Zynga,the company behind the social games CityVille and Words With Friends,sold stock to the public for the first time in December 2011,funds were being raised in a ________ market,and when those newly issued shares are resold to other buyers,the sales take place in a ________ market.

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency, government Price Setting, and Taxes

Externalities, environmental Policy, and Public Goods

Elasticity: the Responsiveness of Demand and Supply

The Economics of Health Care

Comparative Advantage and the Gains From International Trade

Consumer Choice and Behavioral Economics

Technology, production, and Costs

Firms in Perfectly Competitive Markets

Monopolistic Competition: the Competitive Model in a More Realistic Setting

Oligopoly: Firms in Less Competitive Markets

Monopoly and Antitrust Policy

Pricing Strategy

The Markets for Labor and Other Factors of Production

Public Choice, taxes, and the Distribution of Income

Filters

When Zynga,the company behind the social games CityVille and Words With Friends,sold stock to the public for the first time in December 2011,funds were being raised in a market,and when those newly issued shares are resold to other buyers,the sales take place in a market.