Question 1

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

Accepted Answer

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

Question 2

How much is a bond that pays $80 in coupon payments for 4 years and $1,000 at the end of the fourth year worth if the interest rate is 6%?

Accepted Answer

A) $855.46 
B) $1,045.56 
C) $1,069.30 
D) $1,140.00 
A) $855.46 
B) $1,045.56 
C) $1,069.30 
D) $1,140.00

Question 3

Which of the following statements is false?

Accepted Answer

A) Corporations can issue stocks and bonds,while proprietorships cannot. 
B) Corporations have one owner,while proprietorships have many owners. 
C) Corporations face more taxes than do proprietorships. 
D) Proprietorships have unlimited liability while corporations have limited liability. 
A) Corporations can issue stocks and bonds,while proprietorships cannot. 
B) Corporations have one owner,while proprietorships have many owners. 
C) Corporations face more taxes than do proprietorships. 
D) Proprietorships have unlimited liability while corporations have limited liability.

Question 4

All of the following take place in the direct finance market except

Accepted Answer

A) ownership in corporations is sold in the form of common stock. 
B) deposits from savers are accumulated and loans made to borrowers. 
C) ownership in corporations is sold in the form of preferred stock. 
D) corporate bonds are sold to savers. 
A) ownership in corporations is sold in the form of common stock. 
B) deposits from savers are accumulated and loans made to borrowers. 
C) ownership in corporations is sold in the form of preferred stock. 
D) corporate bonds are sold to savers.

Question 5

In 2002,WorldCom was accused of falsifying information regarding liabilities on WorldCom's balance sheets,thereby

Accepted Answer

A) increasing WorldCom's assets on the balance sheet. 
B) reducing WorldCom's profit on the balance sheet. 
C) increasing WorldCom's net worth on the balance sheet. 
D) reducing WorldCom's net income on the income statement. 
A) increasing WorldCom's assets on the balance sheet. 
B) reducing WorldCom's profit on the balance sheet. 
C) increasing WorldCom's net worth on the balance sheet. 
D) reducing WorldCom's net income on the income statement.

Question 6

How is the interest rate on a bond calculated?

Accepted Answer

The interest rate,or coupon ra

Question 7

In the United States,corporate profits are taxed at the corporate level and then are taxed again as personal income in the form of dividend payments.

Accepted Answer

A) True 
 B)False

Question 8

If a firm fails to provide investors with at least a normal rate of return

Accepted Answer

A) it will not be able to remain in business in the long run. 
B) it will not be able to remain in business in the short run. 
C) it will shut down in the short run but will be able to remain in business in the long run. 
D) it will have a positive economic profit but a negative accounting profit. 
A) it will not be able to remain in business in the long run. 
B) it will not be able to remain in business in the short run. 
C) it will shut down in the short run but will be able to remain in business in the long run. 
D) it will have a positive economic profit but a negative accounting profit.

Question 9

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 10

If the personal assets of the owners cannot be claimed if the business is bankrupt,the owners are said to have

Accepted Answer

A) unlimited liability. 
B) a proprietorship type of business. 
C) limited liability. 
D) a partnership type of business. 
A) unlimited liability. 
B) a proprietorship type of business. 
C) limited liability. 
D) a partnership type of business.

Question 11

Goodwill is listed as an asset on a firm's balance sheet.

Accepted Answer

A) True 
 B)False

Question 12

A firm's managers need information on the firm's revenue and costs as well as information on the value of a firm's assets and the amount of the firm's debts to answer three basic questions.Which of the following is not one of those three basic questions?

Accepted Answer

A) what to produce? 
B) how to produce it? 
C) what price to charge? 
D) where to produce? 
A) what to produce? 
B) how to produce it? 
C) what price to charge? 
D) where to produce?

Question 13

If a corporate bond with face value of $8,000 has an interest rate of 4 percent paid once a year for a term of 30 years,what is the size of the coupon payment?

Accepted Answer

A) $320 
B) $2,000 
C) $8,000 
D) $9,600 
A) $320 
B) $2,000 
C) $8,000 
D) $9,600

Question 14

Assume you and your cousin Vinny set up a partnership and your lawyer tells you that as the owners you will each face unlimited liability.What does that mean?

Accepted Answer

A) You are each liable for organizing the business. 
B) Each of you could stand to lose your personal wealth if the business goes bankrupt. 
C) There is no legal responsibility of the business in case a customer sues,as the business is legally untouchable. 
D) None of these explain what unlimited liability means. 
A) You are each liable for organizing the business. 
B) Each of you could stand to lose your personal wealth if the business goes bankrupt. 
C) There is no legal responsibility of the business in case a customer sues,as the business is legally untouchable. 
D) None of these explain what unlimited liability means.

Question 15

If the present value equation used to calculate the price of a stock you are considering buying is "[$7 / (0.04 - 0.03)]," which of the following is correct,assuming that dividends will grow at a constant rate?

Accepted Answer

A) The stock price is $7,the dividend growth rate is 3 percent,and the interest rate is 1 percent. 
B) The dividend is $7 per share,the dividend growth rate is 1 percent,and the interest rate is 4 percent. 
C) The stock price is $700,the dividend growth rate is 3 percent,and the interest rate is 4 percent. 
D) The dividend is $7 per share,the dividend growth rate is 4 percent,and the interest rate is 3 percent. 
A) The stock price is $7,the dividend growth rate is 3 percent,and the interest rate is 1 percent. 
B) The dividend is $7 per share,the dividend growth rate is 1 percent,and the interest rate is 4 percent. 
C) The stock price is $700,the dividend growth rate is 3 percent,and the interest rate is 4 percent. 
D) The dividend is $7 per share,the dividend growth rate is 4 percent,and the interest rate is 3 percent.

Question 16

The Sarbanes-Oxley Act of 2002 requires that each member of the board of directors personally certify the accuracy of financial reports.

Accepted Answer

A) True 
 B)False

Question 17

How does a firm raise external funds through direct finance?

Accepted Answer

With direct finance,funds flow

Question 18

What are the advantages of setting up a corporation as opposed to a proprietorship or partnership?

Accepted Answer

Corporations have li

Question 19

Which of the following would explain why accounting profit might be greater than economic profit?

Accepted Answer

A) A firm has implicit costs as well as explicit costs. 
B) A firm has only explicit costs. 
C) A firm's net income is greater than its accounting profit. 
D) A firm's net income is less than its accounting profit. 
A) A firm has implicit costs as well as explicit costs. 
B) A firm has only explicit costs. 
C) A firm's net income is greater than its accounting profit. 
D) A firm's net income is less than its accounting profit.

Question 20

Unlike firms that sell stock in financial markets,which are known as ________ firms,companies which do not sell stock in financial markets are known as ________ firms.

Accepted Answer

A) public;private 
B) open;closed 
C) corporate;proprietary 
D) stock market;bond market 
A) public;private 
B) open;closed 
C) corporate;proprietary 
D) stock market;bond market

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

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

How much is a bond that pays $80 in coupon payments for 4 years and $1,000 at the end of the fourth year worth if the interest rate is 6%?

Which of the following statements is false?

All of the following take place in the direct finance market except

In 2002,WorldCom was accused of falsifying information regarding liabilities on WorldCom's balance sheets,thereby

How is the interest rate on a bond calculated?

In the United States,corporate profits are taxed at the corporate level and then are taxed again as personal income in the form of dividend payments.

If a firm fails to provide investors with at least a normal rate of return

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?

If the personal assets of the owners cannot be claimed if the business is bankrupt,the owners are said to have

Goodwill is listed as an asset on a firm's balance sheet.

A firm's managers need information on the firm's revenue and costs as well as information on the value of a firm's assets and the amount of the firm's debts to answer three basic questions.Which of the following is not one of those three basic questions?

If a corporate bond with face value of $8,000 has an interest rate of 4 percent paid once a year for a term of 30 years,what is the size of the coupon payment?

Assume you and your cousin Vinny set up a partnership and your lawyer tells you that as the owners you will each face unlimited liability.What does that mean?

If the present value equation used to calculate the price of a stock you are considering buying is "[$7 / (0.04 - 0.03)]," which of the following is correct,assuming that dividends will grow at a constant rate?

The Sarbanes-Oxley Act of 2002 requires that each member of the board of directors personally certify the accuracy of financial reports.

How does a firm raise external funds through direct finance?

What are the advantages of setting up a corporation as opposed to a proprietorship or partnership?

Which of the following would explain why accounting profit might be greater than economic profit?

Unlike firms that sell stock in financial markets,which are known as ________ firms,companies which do not sell stock in financial markets are known as ________ firms.

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

Unlike firms that sell stock in financial markets,which are known as firms,companies which do not sell stock in financial markets are known as firms.