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

Explain the relationship between the interest rate on a bond and the default risk on a bond.

In the United States,________ percent of all firms are sole proprietorships.

Explain if a business would be expected to survive in the long run if it earned a positive accounting profit but a negative economic profit.

Dividing the dividend payment by the stock's ________ determines the dividend yield.

Owners of a corporation ________ through dividend payments on shares of that firm's stock.

The securitization of mortgages was first carried out by

The interest payment on a bond is called a face value payment.

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?

A nonmonetary opportunity cost is

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

A firm's net income is also its accounting profit.

Corporations are legally owned by their board of directors.

Stocks represent partial ownership of a firm.

If the face value of a bond is $5,000 and the coupon is $200,what is the interest rate?

When the coupon rate on newly issued bonds ________ relative to older,outstanding bonds,the market price of the older bond ________.

One of the most widely followed stock indexes in the United States is the S&P 500.This index represents

________ of people work at firms that have 50 or more employees.

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?

Which of the following can only be sold back to the firm that issued them?

Tying salaries of top managers to the profits of the firm is a way to reduce the effect of the principal-agent problem.