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

If you purchased a newly issued 30-year bond from American Airlines with a face value of $1,000 and a coupon payment of 3 percent,American Airlines would pay you

How much is a bond worth today if it pays $50 in coupon payments for 3 years and $1,000 at the end of the third year,and the interest rate is 10%?

Mutual funds give individual investors a low-cost way to diversify.

If a firm has implicit costs as well as explicit costs

If a stock's dividend is expected to grow at a constant rate of 4 percent in the future and it has just paid a dividend of $6.00 per share,and you have an alternative investment of equal risk that will earn a 7 percent rate of return,what would you be willing to pay per share for this stock?

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?

When a business is set up as a partnership,the owners of the business face unlimited liability.

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

When the coupon rate on newly issued bonds ________ relative to older,outstanding bonds,the market price of the older bond ________

What type of business is the easiest to set up?

The securitization of mortgages was first carried out by

The present value of $1,500 received 8 years in the future would be calculated as which of the following when the interest rate is 3%?

An asset is anything of value owned by a person or 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 are the implicit costs of her business?

How can a corporation's board of directors and its managers try to reduce the principal-agent problem?

Laura's Pizza Place incurs $800,000 per year in explicit costs and $100,000 in implicit costs.The restaurant earns $1.3 million in revenues.Based on this information,what is the accounting profit for Laura's Pizza Place?

What are liabilities?

If you borrow $5,000 from your bank to purchase shares of Twitter from your cousin Vinny,this is an example of obtaining ________ financing and purchasing the stock in a ________ market.

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.

A decrease in liabilities will reduce a firm's accounting profit.