Question 1

Using present value to calculate stock prices is ________ than using present value to calculate bond prices because ________.

Accepted Answer

A) less accurate;dividend payments for stocks are known with certainty but coupon payments for bonds are not 
B) less accurate;coupon payments for bonds are known with certainty but dividend payments for stocks are not 
C) more accurate;dividend payments for stocks are known with certainty but coupon payments for bonds are not 
D) more accurate;coupon payments for bonds are known with certainty but dividend payments for stocks are not 
A) less accurate;dividend payments for stocks are known with certainty but coupon payments for bonds are not 
B) less accurate;coupon payments for bonds are known with certainty but dividend payments for stocks are not 
C) more accurate;dividend payments for stocks are known with certainty but coupon payments for bonds are not 
D) more accurate;coupon payments for bonds are known with certainty but dividend payments for stocks are not

Question 2

Generally with bond ratings,the ________ the rating,the higher the interest rate an investor will receive and the ________ the risk that the issuer of the bond will default.

Accepted Answer

A) higher;higher 
B) higher;lower 
C) lower;higher 
D) lower;lower 
A) higher;higher 
B) higher;lower 
C) lower;higher 
D) lower;lower

Question 3

Which of the following is one of the most widely followed stock indexes in the United States?

Accepted Answer

A) the Dow Jones Industrial Average 
B) the Chicago Mercantile Exchange 
C) the Fortune 500 
D) the Securities and Exchange Commission 
A) the Dow Jones Industrial Average 
B) the Chicago Mercantile Exchange 
C) the Fortune 500 
D) the Securities and Exchange Commission

Question 4

Torrie is thinking of starting up a small business selling hand-painted wine glasses.She is considering setting up her business as a sole proprietorship.What is one disadvantage to Torrie of setting up her business as a sole proprietorship?

Accepted Answer

A) As a sole proprietor,Torrie would be taxed twice. 
B) As a sole proprietor,Torrie would not have control of the business. 
C) As a sole proprietor,Torrie would face unlimited liability. 
D) As a sole proprietor,Torrie would be subject to significant rules and regulations. 
A) As a sole proprietor,Torrie would be taxed twice. 
B) As a sole proprietor,Torrie would not have control of the business. 
C) As a sole proprietor,Torrie would face unlimited liability. 
D) As a sole proprietor,Torrie would be subject to significant rules and regulations.

Question 5

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 6

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?

Accepted Answer

Prize 1: Present value = $200,

Question 7

Corporate managers and shareholders do not always have the same goals.

Accepted Answer

A) True 
 B)False

Question 8

Assume you and your best friend set up a partnership and your lawyer tells you that as the owners,you could each stand to lose your personal wealth if the business goes bankrupt.This means a partnership

Accepted Answer

A) faces limited liability. 
B) faces unlimited liability. 
C) has little chance of succeeding. 
D) is not a good type of business to set up. 
A) faces limited liability. 
B) faces unlimited liability. 
C) has little chance of succeeding. 
D) is not a good type of business to set up.

Question 9

Harry's Hookahs incurs $700,000 per year in explicit costs and $500,000 in implicit costs.The company earns $1.4 million in revenues and has $3.7 million in net worth.Based on this information,what is the accounting profit for Harry's Hookas?

Accepted Answer

A) $200,000 
B) $700,000 
C) $900,000 
D) $1.1 million 
A) $200,000 
B) $700,000 
C) $900,000 
D) $1.1 million

Question 10

Why is a bond considered to be a loan but a share of stock is not?

Accepted Answer

A bond is a loan because the firm promis

Question 11

In the eyes of the law,a corporation is a legal "person," separate from its owners.Explain what this means.

Accepted Answer

This means that the firm is a separate l

Question 12

A ________ is owned by its stockholders.

Accepted Answer

A) sole proprietorship 
B) corporation 
C) partnership 
D) All of the above are correct. 
A) sole proprietorship 
B) corporation 
C) partnership 
D) All of the above are correct.

Question 13

With respect to business types,what does the term 'limited liability' mean?

Accepted Answer

Limited liability is a legal provision t

Question 14

If a corporate bond with face value of $1,000 has an interest rate of seven percent paid once a year for a term of 10 years,what is the size of the coupon payment?

Accepted Answer

A) $1,000 
B) $700 
C) $70 
D) $7 
A) $1,000 
B) $700 
C) $70 
D) $7

Question 15

Both stocks and bonds have maturity dates.

Accepted Answer

A) True 
 B)False

Question 16

The present value of $1,500 received 8 years in the future would be calculated as which of the following when the interest rate is 3%?

Accepted Answer

A) 1,500/(1.3)8 
B) 1,500/(1.03)8 
C) 1,500 × 1.3 × 8 
D) 8.03/1,500 
A) 1,500/(1.3)8 
B) 1,500/(1.03)8 
C) 1,500 × 1.3 × 8 
D) 8.03/1,500

Question 17

How do the owners of a corporation relate to the business?

Accepted Answer

A) The owners and the business are not separate legal entities. 
B) The owners and the business are separate legal entities. 
C) The assets of the owners are considered the same as the assets of the business. 
D) None of these describe the legal relationship of the owners to the business. 
A) The owners and the business are not separate legal entities. 
B) The owners and the business are separate legal entities. 
C) The assets of the owners are considered the same as the assets of the business. 
D) None of these describe the legal relationship of the owners to the business.

Question 18

Profits that are reinvested in a firm rather than paid to the firm's owners are called

Accepted Answer

A) dividends. 
B) stock options. 
C) retained earnings. 
D) corporate bonds. 
A) dividends. 
B) stock options. 
C) retained earnings. 
D) corporate bonds.

Question 19

Torrie is thinking of starting up a small business selling hand-painted wine glasses.She is considering setting up her business as a corporation.What is one advantage to Torrie of setting up her business as a corporation?

Accepted Answer

A) By setting up the business as a corporation,Torrie would not face double taxation. 
B) By setting up the business as a corporation,Torrie would have the ability to share risk with shareholders. 
C) By setting up the business as a corporation,Torrie would have both ownership and control over the business. 
D) All of the above would be advantages of setting up her business as a corporation. 
A) By setting up the business as a corporation,Torrie would not face double taxation. 
B) By setting up the business as a corporation,Torrie would have the ability to share risk with shareholders. 
C) By setting up the business as a corporation,Torrie would have both ownership and control over the business. 
D) All of the above would be advantages of setting up her business as a corporation.

Question 20

Public companies ________ and private companies ________.

Accepted Answer

A) sell stock in financial markets;also sell stock in financial markets 
B) sell stock in financial markets;do not sell stock in financial markets 
C) do not sell stock in financial markets;also do not sell stock in financial markets 
D) do not sell stock in financial markets;sell stock in financial markets 
A) sell stock in financial markets;also sell stock in financial markets 
B) sell stock in financial markets;do not sell stock in financial markets 
C) do not sell stock in financial markets;also do not sell stock in financial markets 
D) do not sell stock in financial markets;sell stock in financial markets

Using present value to calculate stock prices is than using present value to calculate bond prices because .

Generally with bond ratings,the the rating,the higher the interest rate an investor will receive and the the risk that the issuer of the bond will default.

Which of the following is one of the most widely followed stock indexes in the United States?

Torrie is thinking of starting up a small business selling hand-painted wine glasses.She is considering setting up her business as a sole proprietorship.What is one disadvantage to Torrie of setting up her business as a sole proprietorship?

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

Corporate managers and shareholders do not always have the same goals.

Assume you and your best friend set up a partnership and your lawyer tells you that as the owners,you could each stand to lose your personal wealth if the business goes bankrupt.This means a partnership

Harry's Hookahs incurs $700,000 per year in explicit costs and $500,000 in implicit costs.The company earns $1.4 million in revenues and has $3.7 million in net worth.Based on this information,what is the accounting profit for Harry's Hookas?

Why is a bond considered to be a loan but a share of stock is not?

In the eyes of the law,a corporation is a legal "person," separate from its owners.Explain what this means.

A ________ is owned by its stockholders.

With respect to business types,what does the term 'limited liability' mean?

If a corporate bond with face value of $1,000 has an interest rate of seven percent paid once a year for a term of 10 years,what is the size of the coupon payment?

Both stocks and bonds have maturity dates.

The present value of $1,500 received 8 years in the future would be calculated as which of the following when the interest rate is 3%?

How do the owners of a corporation relate to the business?

Profits that are reinvested in a firm rather than paid to the firm's owners are called

Torrie is thinking of starting up a small business selling hand-painted wine glasses.She is considering setting up her business as a corporation.What is one advantage to Torrie of setting up her business as a corporation?

Public companies and private companies .

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

The Economics of Health Care

Comparative Advantage and the Gains From International Trade

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

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

Using present value to calculate stock prices is ________ than using present value to calculate bond prices because ________.

Generally with bond ratings,the ________ the rating,the higher the interest rate an investor will receive and the ________ the risk that the issuer of the bond will default.

Which of the following is one of the most widely followed stock indexes in the United States?

Torrie is thinking of starting up a small business selling hand-painted wine glasses.She is considering setting up her business as a sole proprietorship.What is one disadvantage to Torrie of setting up her business as a sole proprietorship?

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

Corporate managers and shareholders do not always have the same goals.

Assume you and your best friend set up a partnership and your lawyer tells you that as the owners,you could each stand to lose your personal wealth if the business goes bankrupt.This means a partnership

Harry's Hookahs incurs $700,000 per year in explicit costs and $500,000 in implicit costs.The company earns $1.4 million in revenues and has $3.7 million in net worth.Based on this information,what is the accounting profit for Harry's Hookas?

Why is a bond considered to be a loan but a share of stock is not?

In the eyes of the law,a corporation is a legal "person," separate from its owners.Explain what this means.

A ________ is owned by its stockholders.

With respect to business types,what does the term 'limited liability' mean?

If a corporate bond with face value of $1,000 has an interest rate of seven percent paid once a year for a term of 10 years,what is the size of the coupon payment?

Both stocks and bonds have maturity dates.

The present value of $1,500 received 8 years in the future would be calculated as which of the following when the interest rate is 3%?

How do the owners of a corporation relate to the business?

Profits that are reinvested in a firm rather than paid to the firm's owners are called

Torrie is thinking of starting up a small business selling hand-painted wine glasses.She is considering setting up her business as a corporation.What is one advantage to Torrie of setting up her business as a corporation?

Public companies ________ and private companies ________.

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

The Economics of Health Care

Comparative Advantage and the Gains From International Trade

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

Using present value to calculate stock prices is than using present value to calculate bond prices because .

Generally with bond ratings,the the rating,the higher the interest rate an investor will receive and the the risk that the issuer of the bond will default.

Public companies and private companies .