Question 1

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 2

What is the difference between buying stocks and buying bonds?

Accepted Answer

A) A stock can possibly pay dividends forever,but bonds have a fixed number of payments. 
B) Differences of opinion about a stock's future may vary considerably but there is less difference about a bond's future. 
C) The future growth of a stock is more uncertain than the payments of a bond. 
D) All of these are differences between stocks and bonds. 
A) A stock can possibly pay dividends forever,but bonds have a fixed number of payments. 
B) Differences of opinion about a stock's future may vary considerably but there is less difference about a bond's future. 
C) The future growth of a stock is more uncertain than the payments of a bond. 
D) All of these are differences between stocks and bonds.

Question 3

Raising funds through financial intermediaries is called

Accepted Answer

A) direct finance. 
B) corporate finance. 
C) indirect finance. 
D) dividend reinvestment. 
A) direct finance. 
B) corporate finance. 
C) indirect finance. 
D) dividend reinvestment.

Question 4

Traditionally,Wall Street investment banks had been organized as partnerships,but by 2000 they had converted to being publicly traded corporations.As partnerships,the principle-agent problem is ________,but as publicly traded corporations,the principal-agent problem is often ________.

Accepted Answer

A) increased;more severe 
B) increased;less severe 
C) reduced;more severe 
D) reduced;less severe 
A) increased;more severe 
B) increased;less severe 
C) reduced;more severe 
D) reduced;less severe

Question 5

Who hires the managers of a corporation?

Accepted Answer

A) the board of directors 
B) stockholders 
C) managers 
D) employees 
A) the board of directors 
B) stockholders 
C) managers 
D) employees

Question 6

How do a partnership and a corporation differ?

Accepted Answer

A) Partnerships have unlimited liability while corporations have limited liability. 
B) Corporations can issue stocks and bonds,while partnerships cannot. 
C) Corporations face more taxes than do partnerships. 
D) All of these are differences between the two types of businesses. 
A) Partnerships have unlimited liability while corporations have limited liability. 
B) Corporations can issue stocks and bonds,while partnerships cannot. 
C) Corporations face more taxes than do partnerships. 
D) All of these are differences between the two types of businesses.

Question 7

The decline in starting new businesses

Accepted Answer

A) is not concentrated in one industry. 
B) is concentrated primarily in high-tech industries. 
C) is concentrated primarily in health care industries. 
D) is concentrated primarily in public service industries. 
A) is not concentrated in one industry. 
B) is concentrated primarily in high-tech industries. 
C) is concentrated primarily in health care industries. 
D) is concentrated primarily in public service industries.

Question 8

When Electronic Arts,the company behind the games Zuma and Plants vs.Zombies,sold stock to the public for the first time in September 1989,funds were being raised in a ________ market,and when those newly issued shares are resold to other buyers,the sales take place in a ________ market.

Accepted Answer

A) primary;primary 
B) primary;secondary 
C) secondary;primary 
D) secondary;secondary 
A) primary;primary 
B) primary;secondary 
C) secondary;primary 
D) secondary;secondary

Question 9

What is an outside director?

Accepted Answer

A) a member of the board of directors who does not have a direct management role in the firm 
B) a member of a corporate board of directors that is also a manager of the business 
C) the CEO that is selected by the corporation's board of directors 
D) a board of director chair who has been in the job for less than one year 
A) a member of the board of directors who does not have a direct management role in the firm 
B) a member of a corporate board of directors that is also a manager of the business 
C) the CEO that is selected by the corporation's board of directors 
D) a board of director chair who has been in the job for less than one year

Question 10

Which of the following statements is true?

Accepted Answer

A) A stock can possibly pay dividends forever,but bonds have a fixed number of payments. 
B) Differences of opinion about a bond's future may vary considerably but there is less difference about a stock's future. 
C) The future growth of a stock is more certain than the payments of a bond. 
D) Bonds represent partial ownership in a firm but stocks do not. 
A) A stock can possibly pay dividends forever,but bonds have a fixed number of payments. 
B) Differences of opinion about a bond's future may vary considerably but there is less difference about a stock's future. 
C) The future growth of a stock is more certain than the payments of a bond. 
D) Bonds represent partial ownership in a firm but stocks do not.

Question 11

You have a bond that pays $125 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 $140 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 $75 per year. 
A) Coupon payments on newly-issued bonds rise to $140 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 $75 per year.

Question 12

Why might a small investor be interested in buying a mutual fund as opposed to stock in an individual company?

Accepted Answer

By buying shares in a mutual fund,small

Question 13

All of the following are shown on a firm's income statement except

Accepted Answer

A) costs 
B) profits 
C) revenues 
D) rate of return for investors 
A) costs 
B) profits 
C) revenues 
D) rate of return for investors

Question 14

A corporation is

Accepted Answer

A) the easiest type of business to set up. 
B) the least expensive type of business to set up. 
C) the most difficult type of business to set up. 
D) the least profitable type of business to set up. 
A) the easiest type of business to set up. 
B) the least expensive type of business to set up. 
C) the most difficult type of business to set up. 
D) the least profitable type of business to set up.

Question 15

In addition to requiring that CEO's personally certify the accuracy of financial statements,the Sarbanes-Oxley Act of 2002 also requires that

Accepted Answer

A) CEO's conduct audits of their corporations themselves. 
B) firms raise funds for expansion through the sale of bonds only,not stocks. 
C) auditors disclose any potential conflicts of interest. 
D) corporations issue financial statements monthly rather than quarterly. 
A) CEO's conduct audits of their corporations themselves. 
B) firms raise funds for expansion through the sale of bonds only,not stocks. 
C) auditors disclose any potential conflicts of interest. 
D) corporations issue financial statements monthly rather than quarterly.

Question 16

A normal rate of return refers to the ________ that investors must earn on the funds they invest in a firm,expressed as a percentage of the amount invested.

Accepted Answer

A) minimum amount 
B) maximum amount 
C) total amount 
D) profit 
A) minimum amount 
B) maximum amount 
C) total amount 
D) profit

Question 17

If a corporate bond with a face value of $2,000 pays yearly coupon payments of $50,what is the coupon rate?

Accepted Answer

A) 2.5% 
B) 4% 
C) 25% 
D) 40% 
A) 2.5% 
B) 4% 
C) 25% 
D) 40%

Question 18

Which type of businesses earns the majority of profits in the United States?

Accepted Answer

A) corporations 
B) partnerships 
C) sole proprietorships 
D) none of these 
A) corporations 
B) partnerships 
C) sole proprietorships 
D) none of these

Question 19

The only type of business that faces unlimited liability is a corporation.

Accepted Answer

A) True 
 B)False

Question 20

Assets minus liabilities equals

Accepted Answer

A) accounting profit. 
B) economic profit. 
C) net worth. 
D) implicit costs. 
A) accounting profit. 
B) economic profit. 
C) net worth. 
D) implicit costs.

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

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?

What is the difference between buying stocks and buying bonds?

Raising funds through financial intermediaries is called

Traditionally,Wall Street investment banks had been organized as partnerships,but by 2000 they had converted to being publicly traded corporations.As partnerships,the principle-agent problem is ________,but as publicly traded corporations,the principal-agent problem is often ________.

Who hires the managers of a corporation?

How do a partnership and a corporation differ?

The decline in starting new businesses

When Electronic Arts,the company behind the games Zuma and Plants vs.Zombies,sold stock to the public for the first time in September 1989,funds were being raised in a ________ market,and when those newly issued shares are resold to other buyers,the sales take place in a ________ market.

What is an outside director?

Which of the following statements is true?

You have a bond that pays $125 per year in coupon payments.Which of the following would result in an increase in the price of your bond?

Why might a small investor be interested in buying a mutual fund as opposed to stock in an individual company?

All of the following are shown on a firm's income statement except

A corporation is

In addition to requiring that CEO's personally certify the accuracy of financial statements,the Sarbanes-Oxley Act of 2002 also requires that

A normal rate of return refers to the ________ that investors must earn on the funds they invest in a firm,expressed as a percentage of the amount invested.

If a corporate bond with a face value of $2,000 pays yearly coupon payments of $50,what is the coupon rate?

Which type of businesses earns the majority of profits in the United States?

The only type of business that faces unlimited liability is a corporation.

Assets minus liabilities equals

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

Traditionally,Wall Street investment banks had been organized as partnerships,but by 2000 they had converted to being publicly traded corporations.As partnerships,the principle-agent problem is ,but as publicly traded corporations,the principal-agent problem is often .

When Electronic Arts,the company behind the games Zuma and Plants vs.Zombies,sold stock to the public for the first time in September 1989,funds were being raised in a market,and when those newly issued shares are resold to other buyers,the sales take place in a market.