Question 1

As a business type,corporations ________ in the United States.

Accepted Answer

A)  earn the majority of revenues 
B)  are the most common 
C)  are the least common 
D)  are subject to the fewest taxes 
A)  earn the majority of revenues 
B)  are the most common 
C)  are the least common 
D)  are subject to the fewest taxes

Question 2

If you own a bond with a 3 percent coupon rate and new bonds are paying 8 percent,what will happen to your bond's market price?

Accepted Answer

The answer of If you own a bond with a...

Question 3

A firm's net income is also its

Accepted Answer

A)  economic profit. 
B)  balance sheet. 
C)  accounting profit. 
D)  opportunity cost. 
A)  economic profit. 
B)  balance sheet. 
C)  accounting profit. 
D)  opportunity cost.

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

If you own a bond with a seven percent coupon rate and new bonds are paying five percent,what will happen to your bond's market price?

Accepted Answer

The answer of If you own a bond with a...

Question 6

When a business is set up as a sole proprietorship,the owner of the business faces limited liability.

Accepted Answer

A) True 
 B)False

Question 7

The financial statements of firms generally are audited by

Accepted Answer

A)  employees of the firm being audited. 
B)  employees of private accounting firms. 
C)  employees of the federal government. 
D)  the board of directors of the corporation being audited. 
A)  employees of the firm being audited. 
B)  employees of private accounting firms. 
C)  employees of the federal government. 
D)  the board of directors of the corporation being audited.

Question 8

The volatility of a stock's market price is indicated by

Accepted Answer

A)  the highest stock price and the lowest stock price over the previous year. 
B)  the price of newly issued shares compared to the price of previously issued shares. 
C)  the difference between the stock's selling price and its asking price. 
D)  the stock's price-earnings ratio. 
A)  the highest stock price and the lowest stock price over the previous year. 
B)  the price of newly issued shares compared to the price of previously issued shares. 
C)  the difference between the stock's selling price and its asking price. 
D)  the stock's price-earnings ratio.

Question 9

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 10

On a balance sheet

Accepted Answer

A)  total assets must equal total liabilities plus equity. 
B)  total assets plus equity must equal total liabilities. 
C)  total assets plus total liabilities must equal zero. 
D)  total assets plus total liabilities plus equity must equal zero. 
A)  total assets must equal total liabilities plus equity. 
B)  total assets plus equity must equal total liabilities. 
C)  total assets plus total liabilities must equal zero. 
D)  total assets plus total liabilities plus equity must equal zero.

Question 11

Jeremy is thinking of starting up a small business selling NASCAR memorabilia.He asks his friend,Carmen,if she'd like to join him in setting up a partnership to start the business.What is one disadvantage in joining the partnership that Carmen should consider?

Accepted Answer

A)  Carmen should realize that profits in the partnership will be reduced by dividend payments to shareholders. 
B)  Carmen should realize that, as an owner of the business, she will be personally responsible for the debts of the business. 
C)  Carmen should realize that the profits of the business will also be taxed as dividend income, so she faces the potential for double taxation of that business income. 
D)  Carmen should realize that the Jeremy will have complete control over the business because it was his idea. 
A)  Carmen should realize that profits in the partnership will be reduced by dividend payments to shareholders. 
B)  Carmen should realize that, as an owner of the business, she will be personally responsible for the debts of the business. 
C)  Carmen should realize that the profits of the business will also be taxed as dividend income, so she faces the potential for double taxation of that business income. 
D)  Carmen should realize that the Jeremy will have complete control over the business because it was his idea.

Question 12

Stockholders

Accepted Answer

A)  are liable for the debts of a corporation. 
B)  are the owners of a corporation. 
C)  control a corporation's day-to-day activities. 
D)  hire the managers of a corporation. 
A)  are liable for the debts of a corporation. 
B)  are the owners of a corporation. 
C)  control a corporation's day-to-day activities. 
D)  hire the managers of a corporation.

Question 13

Owners of a corporation share in the profits of the firm

Accepted Answer

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

Question 14

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 is her economic profit?

Accepted Answer

A)  $17,000 
B)  $25,000 
C)  $42,000 
D)  $47,000 
A)  $17,000 
B)  $25,000 
C)  $42,000 
D)  $47,000

Question 15

What is the primary difference between a sole proprietorship and a partnership?

Accepted Answer

A)  Proprietorships have unlimited liability while partnerships have limited liability. 
B)  Partnerships can issue stocks and bonds while proprietorships cannot. 
C)  Partnerships have more owners than do proprietorships. 
D)  There is no real difference between the two types of firms. 
A)  Proprietorships have unlimited liability while partnerships have limited liability. 
B)  Partnerships can issue stocks and bonds while proprietorships cannot. 
C)  Partnerships have more owners than do proprietorships. 
D)  There is no real difference between the two types of firms.

Question 16

Who controls a sole proprietorship?

Accepted Answer

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

Question 17

What must balance on a balance sheet?

Accepted Answer

A)  Total assets must equal total liabilities plus equity. 
B)  Revenues must equal costs. 
C)  Retained earnings plus dividends paid must equal earnings per share. 
D)  All of these must balance. 
A)  Total assets must equal total liabilities plus equity. 
B)  Revenues must equal costs. 
C)  Retained earnings plus dividends paid must equal earnings per share. 
D)  All of these must balance.

Question 18

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?

Accepted Answer

A)  As a sole proprietor, Jeremy would face limited liability. 
B)  As a sole proprietor, Jeremy would have the ability to share risk with shareholders. 
C)  As a sole proprietor, Jeremy would have both ownership and control over the business. 
D)  All of the above would be advantages of setting up his business as a sole proprietorship. 
A)  As a sole proprietor, Jeremy would face limited liability. 
B)  As a sole proprietor, Jeremy would have the ability to share risk with shareholders. 
C)  As a sole proprietor, Jeremy would have both ownership and control over the business. 
D)  All of the above would be advantages of setting up his business as a sole proprietorship.

Question 19

You have a bond that pays $60 per year in coupon payments.Which of the following would result in an increase in the price of your bond?

Accepted Answer

A)  Coupon payments on newly-issued bonds rise to $80 per year. 
B)  The likelihood that the firm issuing your bond will default on debt increases. 
C)  The price of a share of stock in the company falls. 
D)  Coupon payments on newly-issued bonds fall to $50 per year. 
A)  Coupon payments on newly-issued bonds rise to $80 per year. 
B)  The likelihood that the firm issuing your bond will default on debt increases. 
C)  The price of a share of stock in the company falls. 
D)  Coupon payments on newly-issued bonds fall to $50 per year.

Question 20

If a stock's dividend is expected to grow at a constant rate of eight percent in the future and it has just paid a dividend of $1.25 a share,and you have an alternative investment of equal risk that will earn a 12 percent rate of return,what would you be willing to pay per share for this stock?

Accepted Answer

A)  $31.25 
B)  $1.40 
C)  $1.25 
D)  $1.12 
A)  $31.25 
B)  $1.40 
C)  $1.25 
D)  $1.12

As a business type,corporations ________ in the United States.

If you own a bond with a 3 percent coupon rate and new bonds are paying 8 percent,what will happen to your bond's market price?

A firm's net income is also its

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

If you own a bond with a seven percent coupon rate and new bonds are paying five percent,what will happen to your bond's market price?

When a business is set up as a sole proprietorship,the owner of the business faces limited liability.

The financial statements of firms generally are audited by

The volatility of a stock's market price is indicated by

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

On a balance sheet

Jeremy is thinking of starting up a small business selling NASCAR memorabilia.He asks his friend,Carmen,if she'd like to join him in setting up a partnership to start the business.What is one disadvantage in joining the partnership that Carmen should consider?

Stockholders

Owners of a corporation share in the profits of the firm

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 is her economic profit?

What is the primary difference between a sole proprietorship and a partnership?

Who controls a sole proprietorship?

What must balance on a balance sheet?

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?

You have a bond that pays $60 per year in coupon payments.Which of the following would result in an increase in the price of your bond?

If a stock's dividend is expected to grow at a constant rate of eight percent in the future and it has just paid a dividend of $1.25 a share,and you have an alternative investment of equal risk that will earn a 12 percent rate of return,what would you be willing to pay per share for this stock?

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

As a business type,corporations ________ in the United States.

If you own a bond with a 3 percent coupon rate and new bonds are paying 8 percent,what will happen to your bond's market price?

A firm's net income is also its

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

If you own a bond with a seven percent coupon rate and new bonds are paying five percent,what will happen to your bond's market price?

When a business is set up as a sole proprietorship,the owner of the business faces limited liability.

The financial statements of firms generally are audited by

The volatility of a stock's market price is indicated by

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

On a balance sheet

Jeremy is thinking of starting up a small business selling NASCAR memorabilia.He asks his friend,Carmen,if she'd like to join him in setting up a partnership to start the business.What is one disadvantage in joining the partnership that Carmen should consider?

Stockholders

Owners of a corporation share in the profits of the firm

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 is her economic profit?

What is the primary difference between a sole proprietorship and a partnership?

Who controls a sole proprietorship?

What must balance on a balance sheet?

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?

You have a bond that pays $60 per year in coupon payments.Which of the following would result in an increase in the price of your bond?

If a stock's dividend is expected to grow at a constant rate of eight percent in the future and it has just paid a dividend of $1.25 a share,and you have an alternative investment of equal risk that will earn a 12 percent rate of return,what would you be willing to pay per share for this stock?

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