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

Suppose you hit a progressive jackpot on a 25-cent Fortunemaker slot machine in a casino in Las Vegas and are given the choice of the following prizes: Prize 1: $200,000 to be received right away,with four additional payments of $200,000 to be received each year for the next four years. Prize 2: $750,000 to be received right away. If the interest rate is 3 percent,what is the present value of each prize?

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

As a result of the financial crisis of 2007-2009,Freddie Mac and Fannie Mae were brought under the direct control of the government.

If the final expressions in a present value equation used to calculate the price of a bond you are considering buying are "[$75 / (1 + .04)⁶] + [$2,500 / (1 + .04)⁶]," which of the following is correct?

Payments by a corporation to its shareholders are known as

In the early 1800s,many state legislatures began to pass general incorporation laws,which

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

A future payment's present value is

Roderick received a $100 savings bond for his graduation.The bond pays $100 at maturity,which is in five years.If the interest rate is 6%,the bond has a present value of $90.09.

Traditionally,Wall Street investment banks had been organized as ________,but by 2000 they had converted to being ________.

Which of the following is an example of an implicit cost that a firm might incur?

Article Summary In an effort to raise funds to cut debt,Fiat Chrysler is selling a stake in Ferrari through an initial public offering (IPO)to be valued at as much as $9.8 billion.17.2 million shares of stock in the company are to be sold,and the stock will be traded on the New York Stock Exchange under the symbol RACE.One analyst speculates that requests for shares in Ferrari may be ten times less than the number available.Including debt,Ferrari will have a value of about $12 billion,and chairman Piero Ferrari will keep a 10 percent stake in the new company and receive about €280 million in cash.Before taxes and interest,Ferrari's 2014 earnings were €389 million,with revenue of €2.8 billion. -When Ferrari sells stock to the public in its IPO,it will do so through the New York Stock Exchange.People who buy the shares will

Limited personal liability is an advantage for

A corporation is limited to how many owners?

If a corporate bond with a face value of $5,000 pays yearly coupon payments of $100,what is the coupon rate?

Which of the following is a characteristic of stock?

How can a partnership raise funds needed for firm expansion?

What does unlimited liability mean?

The Aristocrat Corporation has taken out a loan to buy manufacturing equipment.The loan represents ________ for the company.

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