Question 1

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. C

Question 2

Corporations are legally owned by their shareholders.

Accepted Answer

A) True 
 B)False  True

Question 3

If you purchase a share of stock from your friend who initially purchased the stock three years ago,your purchase of the stock represents a transaction in the secondary financial market.

Accepted Answer

A) True 
 B)False  True

Question 4

Traditionally,Wall Street investment banks had been organized as partnerships,but by 2000 they had converted to being publicly traded companies.As partnerships,the principal-agent problem is ________ because there is ________ separation of ownership from control.

Accepted Answer

A) reduced;much 
B) reduced;little 
C) increased;much 
D) increased;little 
A) reduced;much 
B) reduced;little 
C) increased;much 
D) increased;little

Question 5

Unlike firms that sell stock in financial markets,which are known as ________ firms,companies like Facebook 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

Question 6

What is different about 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 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 these are differences between stocks and bonds.

Question 7

Mortgages issued to borrowers whose credit histories include failures to make payments on bills are known as ________ mortgages.

Accepted Answer

A) catastrophic 
B) variable rate 
C) subprime 
D) Alt-A 
A) catastrophic 
B) variable rate 
C) subprime 
D) Alt-A

Question 8

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

Accepted Answer

A) the out-of-pocket expense to hire resources 
B) taxes owed to the state and Federal governments 
C) the rental value of the office space the company owns and uses for itself 
D) the revenue a firm generates in using its resources 
A) the out-of-pocket expense to hire resources 
B) taxes owed to the state and Federal governments 
C) the rental value of the office space the company owns and uses for itself 
D) the revenue a firm generates in using its resources

Question 9

A sole proprietorship is

Accepted Answer

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

Question 10

If a corporate bond with face value of $1,000 has an interest rate of eight percent paid once a year for a term of 30 years,what is the size of the coupon payment?

Accepted Answer

A) $1,000 
B) $300 
C) $80 
D) $8 
A) $1,000 
B) $300 
C) $80 
D) $8

Question 11

Stockholders

Accepted Answer

A) select the board of directors of a corporation. 
B) select the employees of a corporation. 
C) select the managers of a corporation. 
D) all of the above 
A) select the board of directors of a corporation. 
B) select the employees of a corporation. 
C) select the managers of a corporation. 
D) all of the above

Question 12

What takes place in the indirect finance market?

Accepted Answer

A) Part ownership of corporations is sold in the form of stocks. 
B) Corporate and government bonds are sold to savers. 
C) Deposits of savers are accepted and loans made to borrowers. 
D) Government purchases of buildings and equipment are sold to the highest bidder. 
A) Part ownership of corporations is sold in the form of stocks. 
B) Corporate and government bonds are sold to savers. 
C) Deposits of savers are accepted and loans made to borrowers. 
D) Government purchases of buildings and equipment are sold to the highest bidder.

Question 13

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?

Accepted Answer

A) $17,000 
B) $22,000 
C) $39,000 
D) $47,000 
A) $17,000 
B) $22,000 
C) $39,000 
D) $47,000

Question 14

In a corporation,what are "inside directors" and "outside directors"?

Accepted Answer

Inside directors are members of manageme

Question 15

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

Accepted Answer

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

Question 16

What is an inside director?

Accepted Answer

A) a movie director who also appears in the movie 
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 at least three years 
A) a movie director who also appears in the movie 
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 at least three years

Question 17

During 2007,many "subprime" and "Alt-A" borrowers began to default on their mortgages.Describe "subprime" and "Alt-A" borrowers.

Accepted Answer

"Subprime" borrowers are borrowers whose

Question 18

The person hired by a corporation's board of directors to run the day-to-day operations of the corporation is known as the

Accepted Answer

A) chairman of the board. 
B) chief executive officer. 
C) owner-manager. 
D) corporate governor. 
A) chairman of the board. 
B) chief executive officer. 
C) owner-manager. 
D) corporate governor.

Question 19

What is the difference between retained earnings and dividends?

Accepted Answer

Retained earnings are profits

Question 20

Who controls a sole proprietorship?

Accepted Answer

A) stockholders 
B) bondholders 
C) the owner 
D) all of these 
A) stockholders 
B) bondholders 
C) the owner 
D) all of these

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

Corporations are legally owned by their shareholders.

If you purchase a share of stock from your friend who initially purchased the stock three years ago,your purchase of the stock represents a transaction in the secondary financial market.

Traditionally,Wall Street investment banks had been organized as partnerships,but by 2000 they had converted to being publicly traded companies.As partnerships,the principal-agent problem is because there is separation of ownership from control.

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

What is different about buying stocks and buying bonds?

Mortgages issued to borrowers whose credit histories include failures to make payments on bills are known as ________ mortgages.

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

A sole proprietorship is

If a corporate bond with face value of $1,000 has an interest rate of eight percent paid once a year for a term of 30 years,what is the size of the coupon payment?

Stockholders

What takes place in the indirect finance market?

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?

In a corporation,what are "inside directors" and "outside directors"?

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

What is an inside director?

During 2007,many "subprime" and "Alt-A" borrowers began to default on their mortgages.Describe "subprime" and "Alt-A" borrowers.

The person hired by a corporation's board of directors to run the day-to-day operations of the corporation is known as the

What is the difference between retained earnings and dividends?

Who controls a sole proprietorship?

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Market Efficiency and Market Failure

The Economics of Health Care

Consumer Choice and Elasticity

Technology,production,and Costs

Firms in Perfectly Competitive Markets

Monopoly and Antitrust Policy

Monopolistic Competition and Oligopoly

GDP: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Aggregate Demand and Aggregate Supply Analysis

Money, banks, and the Federal Reserve System

Monetary Policy

Fiscal Policy

Comparative Advantage,international Trade,and Exchange Rates

Filters

Exam 6: Firms, the Stock Market, and Corporate Governance

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

Corporations are legally owned by their shareholders.

If you purchase a share of stock from your friend who initially purchased the stock three years ago,your purchase of the stock represents a transaction in the secondary financial market.

Traditionally,Wall Street investment banks had been organized as partnerships,but by 2000 they had converted to being publicly traded companies.As partnerships,the principal-agent problem is ________ because there is ________ separation of ownership from control.

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

What is different about buying stocks and buying bonds?

Mortgages issued to borrowers whose credit histories include failures to make payments on bills are known as ________ mortgages.

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

A sole proprietorship is

If a corporate bond with face value of $1,000 has an interest rate of eight percent paid once a year for a term of 30 years,what is the size of the coupon payment?

Stockholders

What takes place in the indirect finance market?

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?

In a corporation,what are "inside directors" and "outside directors"?

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

What is an inside director?

During 2007,many "subprime" and "Alt-A" borrowers began to default on their mortgages.Describe "subprime" and "Alt-A" borrowers.

The person hired by a corporation's board of directors to run the day-to-day operations of the corporation is known as the

What is the difference between retained earnings and dividends?

Who controls a sole proprietorship?

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Market Efficiency and Market Failure

The Economics of Health Care

Consumer Choice and Elasticity

Technology,production,and Costs

Firms in Perfectly Competitive Markets

Monopoly and Antitrust Policy

Monopolistic Competition and Oligopoly

GDP: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Aggregate Demand and Aggregate Supply Analysis

Money, banks, and the Federal Reserve System

Monetary Policy

Fiscal Policy

Comparative Advantage,international Trade,and Exchange Rates

Filters

Traditionally,Wall Street investment banks had been organized as partnerships,but by 2000 they had converted to being publicly traded companies.As partnerships,the principal-agent problem is because there is separation of ownership from control.

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