Question 1

More than 80% of American firms are incorporated.

Accepted Answer

A) True 
 B)False  False

Question 2

A "specialist" is a

Accepted Answer

A) stockholder who finds buyers and sellers for specific stocks, but also operates outside of specific stock markets. 
B) person who works on the floor of the New York Stock Exchange and specializes in certain stocks. 
C) stockbroker who operates only in a particular regional stock market. 
D) stockbroker who specializes in the "third market." 
A) stockholder who finds buyers and sellers for specific stocks, but also operates outside of specific stock markets. 
B) person who works on the floor of the New York Stock Exchange and specializes in certain stocks. 
C) stockbroker who operates only in a particular regional stock market. 
D) stockbroker who specializes in the "third market." B

Question 3

Overall, professional securities analysts have a 75% success rate in predicting winning stocks.

Accepted Answer

A) True 
 B)False  False

Question 4

Why is diversification recommended for investors?

Accepted Answer

Holding stock in companies that tend to

Question 5

The basic disadvantage of a proprietorship is unlimited liability.

Accepted Answer

A) True 
 B)False

Question 6

The actions of speculators in a market tend to shift the ____ when the price of the good is low and thereby ____ the price.

Accepted Answer

A) demand curve out; raise 
B) demand curve in; lower 
C) supply curve out; lower 
D) supply curve in; raise 
A) demand curve out; raise 
B) demand curve in; lower 
C) supply curve out; lower 
D) supply curve in; raise

Question 7

The primary source of corporate financing in the United States is

Accepted Answer

A) the sale of stock. 
B) the sale of bonds. 
C) retained earnings. 
D) lending from commercial banks. 
A) the sale of stock. 
B) the sale of bonds. 
C) retained earnings. 
D) lending from commercial banks.

Question 8

A bond and stock differ in that a stock is an IOU for a fixed amount and a bond is a portion of ownership.

Accepted Answer

A) True 
 B)False

Question 9

An investor in an index fund earning 12.3% per year would see an investment of $10,000 increase to approximately ____ in 25 years.

Accepted Answer

A) $11,000 
B) $48,000 
C) $54,000 
D) $170,000 
A) $11,000 
B) $48,000 
C) $54,000 
D) $170,000

Question 10

Suppose you purchase a $1,000 bond that bears an interest rate of 10 percent.What will happen if the interest rate goes to 20 percent?

Accepted Answer

A) The market price of the bond will increase to $2000. 
B) The market price of the bond will drop to $500. 
C) The return on the bond will double. 
D) The return on the bond will halve. 
A) The market price of the bond will increase to $2000. 
B) The market price of the bond will drop to $500. 
C) The return on the bond will double. 
D) The return on the bond will halve.

Question 11

Stocks are riskier for buyers because there is no commitment to pay dividends.

Accepted Answer

A) True 
 B)False

Question 12

A stock market

Accepted Answer

A) guarantees that a seller of a stock will get the price at which the stock was purchased. 
B) is used only to sell new stock issues from corporations and not to transfer existing stocks. 
C) is used only to sell stocks, not to buy stocks. 
D) gives an individual a chance to invest in stocks without committing funds for long periods of time. 
A) guarantees that a seller of a stock will get the price at which the stock was purchased. 
B) is used only to sell new stock issues from corporations and not to transfer existing stocks. 
C) is used only to sell stocks, not to buy stocks. 
D) gives an individual a chance to invest in stocks without committing funds for long periods of time.

Question 13

What percentage of American business firms are incorporated?

Accepted Answer

A) about 20 percent 
B) about 40 percent 
C) about 50 percent 
D) over 60 percent 
A) about 20 percent 
B) about 40 percent 
C) about 50 percent 
D) over 60 percent

Question 14

Bonds can be risky investments because

Accepted Answer

A) bondholders are paid from whatever remains after stockholders have been paid what the corporation owes them. 
B) if the corporation loses its assets, the bondholders may never recover their investments. 
C) the general price level may fall. 
D) the voting power of an individual bondholder may be more apparent than real. 
A) bondholders are paid from whatever remains after stockholders have been paid what the corporation owes them. 
B) if the corporation loses its assets, the bondholders may never recover their investments. 
C) the general price level may fall. 
D) the voting power of an individual bondholder may be more apparent than real.

Question 15

The major advantage of the corporation is

Accepted Answer

A) limited liability for owners. 
B) greater profit incentive than the other forms of business organization. 
C) lower taxes for owners, who are taxed only once. 
D) ability of owners to have hands-on management of the firm. 
A) limited liability for owners. 
B) greater profit incentive than the other forms of business organization. 
C) lower taxes for owners, who are taxed only once. 
D) ability of owners to have hands-on management of the firm.

Question 16

Which of the following is true?

Accepted Answer

A) A bondholder owes money to a corporation. 
B) A corporation owes money to a bondholder. 
C) A bondholder owns part of a corporation. 
D) A bondholder votes on company management. 
A) A bondholder owes money to a corporation. 
B) A corporation owes money to a bondholder. 
C) A bondholder owns part of a corporation. 
D) A bondholder votes on company management.

Question 17

When interest rates in the economy fall, the prices of previously issued bonds

Accepted Answer

A) must fall. 
B) must change, but may either rise or fall. 
C) must rise. 
D) may remain unchanged. 
A) must fall. 
B) must change, but may either rise or fall. 
C) must rise. 
D) may remain unchanged.

Question 18

Random walk theory says

Accepted Answer

A) throwing darts will pick winners. 
B) random selection of stocks will do as well as other methods of stock choice. 
C) speculation can't lose if you wait long enough. 
D) investment in stocks can't be profitable. 
A) throwing darts will pick winners. 
B) random selection of stocks will do as well as other methods of stock choice. 
C) speculation can't lose if you wait long enough. 
D) investment in stocks can't be profitable.

Question 19

Bond prices in the marketplace will fall when

Accepted Answer

A) interest rates fall. 
B) the company is losing money. 
C) interest rates rise. 
D) the company is making money. 
A) interest rates fall. 
B) the company is losing money. 
C) interest rates rise. 
D) the company is making money.

Question 20

The sole owner of a unincorporated business unable to pay its debts:

Accepted Answer

A) may be sued by the people to whom the business owes money 
B) may be forced to pay them out of his own bank account 
C) may be forced to sell his personal property to pay those debts 
D) all of these are correct 
A) may be sued by the people to whom the business owes money 
B) may be forced to pay them out of his own bank account 
C) may be forced to sell his personal property to pay those debts 
D) all of these are correct

Exam 9: Securities Business Finance and the Economy the Tail That Wags the Dog

More than 80% of American firms are incorporated.

A "specialist" is a

Overall, professional securities analysts have a 75% success rate in predicting winning stocks.

Why is diversification recommended for investors?

The basic disadvantage of a proprietorship is unlimited liability.

The actions of speculators in a market tend to shift the ____ when the price of the good is low and thereby ____ the price.

The primary source of corporate financing in the United States is

A bond and stock differ in that a stock is an IOU for a fixed amount and a bond is a portion of ownership.

An investor in an index fund earning 12.3% per year would see an investment of $10,000 increase to approximately ____ in 25 years.

Suppose you purchase a $1,000 bond that bears an interest rate of 10 percent.What will happen if the interest rate goes to 20 percent?

Stocks are riskier for buyers because there is no commitment to pay dividends.

A stock market

What percentage of American business firms are incorporated?

Bonds can be risky investments because

The major advantage of the corporation is

Which of the following is true?

When interest rates in the economy fall, the prices of previously issued bonds

Random walk theory says

Bond prices in the marketplace will fall when

The sole owner of a unincorporated business unable to pay its debts:

What Is Economics

The Economy Myth and Reality

The Fundamental Economic Problem Scarcity and Choice

Supply and Demand an Initial Look

Consumer Choice Individual and Market Demand

Demand and Elasticity

Production Inputs and Cost Building Blocks for Supply Analysis

Output Price and Profit the Importance of Marginal Analysis

The Firm and the Industry Under Perfect Competition

Monopoly

Between Competition and Monopoly

Limiting Market Power Regulation and Antitrust

The Case for Free Markets the Price System

The Shortcomings of Free Markets

Externalities the Environment and Natural Resources

Taxation and Resource Allocation

Pricing the Factors of Production

Labor and Entrepreneurship the Human Inputs

Poverty Inequality and Discrimination

Is Us Economic Leadership Threatened

International Trade and Comparative Advantage

Filters

The actions of speculators in a market tend to shift the when the price of the good is low and thereby the price.