Question 1

The interest payment on a bond is called

Accepted Answer

A) the coupon payment. 
B) principal. 
C) the interest rate. 
D) the face value. 
A) the coupon payment. 
B) principal. 
C) the interest rate. 
D) the face value.

Question 2

The present value of $475 received 3 years in the future would be calculated as which of the following when the interest rate is 6 percent?

Accepted Answer

A) 475/(1.6)3 
B) 475/(1.06)5 
C) 475 × 1.6 × 3 
D) 3.06/475 
A) 475/(1.6)3 
B) 475/(1.06)5 
C) 475 × 1.6 × 3 
D) 3.06/475

Question 3

Who controls a partnership?

Accepted Answer

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

Question 4

If Walmart issues $250 million in new stock to finance the renovation of their retail stores,this is an example of

Accepted Answer

A) a bond market transaction. 
B) indirect finance. 
C) a stock market transaction. 
D) direct finance. 
A) a bond market transaction. 
B) indirect finance. 
C) a stock market transaction. 
D) direct finance.

Question 5

________are the owners of a corporation.

Accepted Answer

A) The board of directors 
B) Stockholders 
C) Top management 
D) Bondholders 
A) The board of directors 
B) Stockholders 
C) Top management 
D) Bondholders

Question 6

Shontae wants to start a pet hotel and is thinking of setting it up as a partnership with her sister Victoria.What are the advantages and disadvantages she will face by setting up the business as a partnership as opposed to a sole proprietorship or a corporation?

Accepted Answer

As a partnership,Shontae has the advanta

Question 7

Which of the following is an advantage of starting a new business as a corporation?

Accepted Answer

A) double taxation 
B) ease in setting up 
C) low expenses of legally organizing 
D) greater ability to raise funds 
A) double taxation 
B) ease in setting up 
C) low expenses of legally organizing 
D) greater ability to raise funds

Question 8

By tying the salaries of top corporate managers to the price of the corporation's stock,corporations hope to avoid

Accepted Answer

A) corporate governance. 
B) conflict between the CFO and the CEO. 
C) the principal-agent problem. 
D) paying high salaries to their managers. 
A) corporate governance. 
B) conflict between the CFO and the CEO. 
C) the principal-agent problem. 
D) paying high salaries to their managers.

Question 9

The higher the default risk on a bond,the higher the interest rate will be.

Accepted Answer

A) True 
 B)False

Question 10

On a balance sheet,a company's accounts receivable are listed as

Accepted Answer

A) current assets. 
B) current liabilities. 
C) stockholder's equity. 
D) goodwill. 
A) current assets. 
B) current liabilities. 
C) stockholder's equity. 
D) goodwill.

Question 11

Corporate managers and shareholders do not always have the same goals.

Accepted Answer

A) True 
 B)False

Question 12

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 13

A firm's accounting profit is also its

Accepted Answer

A) economic profit. 
B) income statement. 
C) net income. 
D) statement of liabilities. 
A) economic profit. 
B) income statement. 
C) net income. 
D) statement of liabilities.

Question 14

The financial statement that sums up a firm's revenues,costs,and profit over a period of time is its

Accepted Answer

A) income statement. 
B) balance sheet. 
C) dividend yield statement. 
D) price-earnings statement. 
A) income statement. 
B) balance sheet. 
C) dividend yield statement. 
D) price-earnings statement.

Question 15

When an investor buys a corporate bond

Accepted Answer

A) the investor becomes part owner of the corporation. 
B) the principal of the bond is a loan to the corporation. 
C) the interest made on the bond represents the bondholder's limited liability in the company. 
D) the face value of the bond is equal to what the investor paid for the bond. 
A) the investor becomes part owner of the corporation. 
B) the principal of the bond is a loan to the corporation. 
C) the interest made on the bond represents the bondholder's limited liability in the company. 
D) the face value of the bond is equal to what the investor paid for the bond.

Question 16

In a partnership,the owners of the business and the business are ________,and in a sole proprietorship,the owner of the business and the business are ________.

Accepted Answer

A) separate legal entities;also separate legal entities 
B) not separate legal entities;also not separate legal entities 
C) not separate legal entities;separate legal entities 
D) separate legal entities;not separate legal entities 
A) separate legal entities;also separate legal entities 
B) not separate legal entities;also not separate legal entities 
C) not separate legal entities;separate legal entities 
D) separate legal entities;not separate legal entities

Question 17

If a company pays a dividend of $2 to be received one year from now,dividends are expected to grow at a rate of 3 percent per year for the indefinite future,and the interest rate is 4 percent,the price of the company's stock should be ________ per share.

Accepted Answer

A) $3.40 
B) $28.57 
C) $200.00 
D) $340.00 
A) $3.40 
B) $28.57 
C) $200.00 
D) $340.00

Question 18

Harry's Hookahs incurs $700,000 per year in explicit costs and $500,000 in implicit costs.The company earns $1.4 million in revenues and has $3.7 million in net worth.Based on this information,what is the economic profit for Harry's Hookas?

Accepted Answer

A) $200,000 
B) $700,000 
C) $900,000 
D) $1.1 million 
A) $200,000 
B) $700,000 
C) $900,000 
D) $1.1 million

Question 19

Tommy's Teddy Bears incurs $300,000 per year in explicit costs and $50,000 in implicit costs.The shop earns $600,000 in revenues and has $1.1 million in net worth.Based on this information,what is accounting profit for Tommy's Teddy Bears?

Accepted Answer

A) $250,000 
B) $300,000 
C) $500,000 
D) $1.35 million 
A) $250,000 
B) $300,000 
C) $500,000 
D) $1.35 million

Question 20

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.

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

The interest payment on a bond is called

The present value of $475 received 3 years in the future would be calculated as which of the following when the interest rate is 6 percent?

Who controls a partnership?

If Walmart issues $250 million in new stock to finance the renovation of their retail stores,this is an example of

________are the owners of a corporation.

Shontae wants to start a pet hotel and is thinking of setting it up as a partnership with her sister Victoria.What are the advantages and disadvantages she will face by setting up the business as a partnership as opposed to a sole proprietorship or a corporation?

Which of the following is an advantage of starting a new business as a corporation?

By tying the salaries of top corporate managers to the price of the corporation's stock,corporations hope to avoid

The higher the default risk on a bond,the higher the interest rate will be.

On a balance sheet,a company's accounts receivable are listed as

Corporate managers and shareholders do not always have the same goals.

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

A firm's accounting profit is also its

The financial statement that sums up a firm's revenues,costs,and profit over a period of time is its

When an investor buys a corporate bond

In a partnership,the owners of the business and the business are ________,and in a sole proprietorship,the owner of the business and the business are ________.

If a company pays a dividend of $2 to be received one year from now,dividends are expected to grow at a rate of 3 percent per year for the indefinite future,and the interest rate is 4 percent,the price of the company's stock should be ________ per share.

Harry's Hookahs incurs $700,000 per year in explicit costs and $500,000 in implicit costs.The company earns $1.4 million in revenues and has $3.7 million in net worth.Based on this information,what is the economic profit for Harry's Hookas?

Tommy's Teddy Bears incurs $300,000 per year in explicit costs and $50,000 in implicit costs.The shop earns $600,000 in revenues and has $1.1 million in net worth.Based on this information,what is accounting profit for Tommy's Teddy Bears?

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

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

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

In a partnership,the owners of the business and the business are ,and in a sole proprietorship,the owner of the business and the business are .