Question 1

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 2

The present value of $300 received 5 years in the future would be calculated as which of the following when the interest rate is 5%?

Accepted Answer

A) 300/(1.5)5 
B) 300/(1.05)5 
C) 300 × 1.5 × 5 
D) 5.05/300 
A) 300/(1.5)5 
B) 300/(1.05)5 
C) 300 × 1.5 × 5 
D) 5.05/300

Question 3

Southwest Airlines wants to raise $20 million to finance the renovation of their corporate offices,and the company wishes to raise the funds through direct finance.Which of the following methods could it use?

Accepted Answer

A) It could issue $20 million in stocks. 
B) It could sell $20 million in bonds. 
C) It could borrow $20 million from a bank. 
D) It could choose either A or B. 
A) It could issue $20 million in stocks. 
B) It could sell $20 million in bonds. 
C) It could borrow $20 million from a bank. 
D) It could choose either A or B.

Question 4

In a corporation,what are "inside directors" and "outside directors"?

Accepted Answer

Inside directors are members of manageme

Question 5

If you own a $1,000 face value bond with one year remaining to maturity and a five percent coupon rate and new bonds are paying 12 percent,what is the most you can get for your old bond?

Accepted Answer

A) $1,120 
B) $1,000 
C) $937.50 
D) impossible to determine without additional information 
A) $1,120 
B) $1,000 
C) $937.50 
D) impossible to determine without additional information

Question 6

All of the following are examples of explicit cost a firm might incur except

Accepted Answer

A) the out-of-pocket expense to hire employees. 
B) taxes owed to the state government. 
C) the rental value of the warehouse space the company owns and uses for itself. 
D) the revenue a firm generates in using its resources. 
A) the out-of-pocket expense to hire employees. 
B) taxes owed to the state government. 
C) the rental value of the warehouse space the company owns and uses for itself. 
D) the revenue a firm generates in using its resources.

Question 7

The minimum amount that investors must earn on the funds they invest in a firm,expressed as a percentage of the amount invested,is referred to as

Accepted Answer

A) the explicit costs of production. 
B) net worth. 
C) net income. 
D) a normal rate of return. 
A) the explicit costs of production. 
B) net worth. 
C) net income. 
D) a normal rate of return.

Question 8

A corporation is

Accepted Answer

A) the easiest type of business to set up. 
B) the least expensive type of business to set up. 
C) the most difficult type of business to set up. 
D) the least profitable type of business to set up. 
A) the easiest type of business to set up. 
B) the least expensive type of business to set up. 
C) the most difficult type of business to set up. 
D) the least profitable type of business to set up.

Question 9

Dividing the dividend payment by the stock's closing market price determines the

Accepted Answer

A) coupon payment. 
B) dividend yield. 
C) price-earnings ratio. 
D) selling price of the stock. 
A) coupon payment. 
B) dividend yield. 
C) price-earnings ratio. 
D) selling price of the stock.

Question 10

When the coupon rate on newly issued bonds decreases relative to older,outstanding bonds,what happens?

Accepted Answer

A) The market price of the older bond falls in the secondary market. 
B) The market price of the older bond rises in the secondary market. 
C) Older bonds can still be sold at their face value. 
D) Older bonds will sell for more than their face value. 
A) The market price of the older bond falls in the secondary market. 
B) The market price of the older bond rises in the secondary market. 
C) Older bonds can still be sold at their face value. 
D) Older bonds will sell for more than their face value.

Question 11

Payments by a corporation to its shareholders are known as

Accepted Answer

A) stocks. 
B) bonds. 
C) coupons. 
D) dividends. 
A) stocks. 
B) bonds. 
C) coupons. 
D) dividends.

Question 12

Who decides who controls a corporation?

Accepted Answer

Stockholders elect a

Question 13

Stockholders

Accepted Answer

A) select the board of directors of a corporation. 
B) select the employees of a corporation. 
C) select the managers of a corporation. 
D) all of the above 
A) select the board of directors of a corporation. 
B) select the employees of a corporation. 
C) select the managers of a corporation. 
D) all of the above

Question 14

Who operates and controls a corporation in its day-to-day activities?

Accepted Answer

A) the board of directors 
B) stockholders 
C) employees 
D) management 
A) the board of directors 
B) stockholders 
C) employees 
D) management

Question 15

Some corporate governance experts believe that serving on a company's board of directors for an extended length of time diminishes that member's independence from the company's CEO.If this is true,it would tend to

Accepted Answer

A) reduce the principal-agent problem. 
B) increase the principal-agent problem. 
C) be in the best interest of shareholders. 
D) have no impact on the company's performance,since the CEO is only one member of top management. 
A) reduce the principal-agent problem. 
B) increase the principal-agent problem. 
C) be in the best interest of shareholders. 
D) have no impact on the company's performance,since the CEO is only one member of top management.

Question 16

Steve Ballmer is the Chief Executive Officer of Microsoft as well as a member of Microsoft's board of directors.Ballmer is therefore classified as an

Accepted Answer

A) inside director. 
B) outside director. 
C) independent director. 
D) unbiased director. 
A) inside director. 
B) outside director. 
C) independent director. 
D) unbiased director.

Question 17

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

Accepted Answer

A) stockholders 
B) the state where chartered 
C) employees 
D) bondholders 
A) stockholders 
B) the state where chartered 
C) employees 
D) bondholders

Question 18

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 19

Raising funds through financial intermediaries is called

Accepted Answer

A) direct finance. 
B) corporate finance. 
C) indirect finance. 
D) dividend reinvestment. 
A) direct finance. 
B) corporate finance. 
C) indirect finance. 
D) dividend reinvestment.

Question 20

Who controls a partnership?

Accepted Answer

A) the owners 
B) stockholders 
C) bondholders 
D) employees 
A) the owners 
B) stockholders 
C) bondholders 
D) employees

What happens in the primary market?

The present value of $300 received 5 years in the future would be calculated as which of the following when the interest rate is 5%?

Southwest Airlines wants to raise $20 million to finance the renovation of their corporate offices,and the company wishes to raise the funds through direct finance.Which of the following methods could it use?

In a corporation,what are "inside directors" and "outside directors"?

If you own a $1,000 face value bond with one year remaining to maturity and a five percent coupon rate and new bonds are paying 12 percent,what is the most you can get for your old bond?

All of the following are examples of explicit cost a firm might incur except

The minimum amount that investors must earn on the funds they invest in a firm,expressed as a percentage of the amount invested,is referred to as

A corporation is

Dividing the dividend payment by the stock's closing market price determines the

When the coupon rate on newly issued bonds decreases relative to older,outstanding bonds,what happens?

Payments by a corporation to its shareholders are known as

Who decides who controls a corporation?

Stockholders

Who operates and controls a corporation in its day-to-day activities?

Some corporate governance experts believe that serving on a company's board of directors for an extended length of time diminishes that member's independence from the company's CEO.If this is true,it would tend to

Steve Ballmer is the Chief Executive Officer of Microsoft as well as a member of Microsoft's board of directors.Ballmer is therefore classified as an

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

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

Raising funds through financial intermediaries is called

Who controls a partnership?

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

The Economics of Health Care

Comparative Advantage and the Gains From International Trade

GDP: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Long-Run Economic Growth: Sources and Policies

Aggregate Expenditure and Output in the Short Run

Aggregate Demand and Aggregate Supply Analysis

Money, banks, and the Federal Reserve System

Monetary Policy

Fiscal Policy

Inflation, unemployment, and Federal Reserve Policy

Macroeconomics in an Open Economy

The International Financial System

Filters

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

What happens in the primary market?

The present value of $300 received 5 years in the future would be calculated as which of the following when the interest rate is 5%?

Southwest Airlines wants to raise $20 million to finance the renovation of their corporate offices,and the company wishes to raise the funds through direct finance.Which of the following methods could it use?

In a corporation,what are "inside directors" and "outside directors"?

If you own a $1,000 face value bond with one year remaining to maturity and a five percent coupon rate and new bonds are paying 12 percent,what is the most you can get for your old bond?

All of the following are examples of explicit cost a firm might incur except

The minimum amount that investors must earn on the funds they invest in a firm,expressed as a percentage of the amount invested,is referred to as

A corporation is

Dividing the dividend payment by the stock's closing market price determines the

When the coupon rate on newly issued bonds decreases relative to older,outstanding bonds,what happens?

Payments by a corporation to its shareholders are known as

Who decides who controls a corporation?

Stockholders

Who operates and controls a corporation in its day-to-day activities?

Some corporate governance experts believe that serving on a company's board of directors for an extended length of time diminishes that member's independence from the company's CEO.If this is true,it would tend to

Steve Ballmer is the Chief Executive Officer of Microsoft as well as a member of Microsoft's board of directors.Ballmer is therefore classified as an

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

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

Raising funds through financial intermediaries is called

Who controls a partnership?

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

The Economics of Health Care

Comparative Advantage and the Gains From International Trade

GDP: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Long-Run Economic Growth: Sources and Policies

Aggregate Expenditure and Output in the Short Run

Aggregate Demand and Aggregate Supply Analysis

Money, banks, and the Federal Reserve System

Monetary Policy

Fiscal Policy

Inflation, unemployment, and Federal Reserve Policy

Macroeconomics in an Open Economy

The International Financial System

Filters