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. D

Question 2

Which of the following is a characteristic of stock?

Accepted Answer

A)  Stock represents a promise to repay a fixed amount of funds. 
B)  The face value or principal plus interest is repaid at a specified period of time. 
C)  The length of coupon payments is fixed by the stated maturity period. 
D)  Stock represents ownership in a firm 
A)  Stock represents a promise to repay a fixed amount of funds. 
B)  The face value or principal plus interest is repaid at a specified period of time. 
C)  The length of coupon payments is fixed by the stated maturity period. 
D)  Stock represents ownership in a firm D

Question 3

If Southwest Airlines borrows $20 million from a bank to finance the renovation of their corporate offices,this is an example of

Accepted Answer

A)  a bond market transaction. 
B)  indirect finance. 
C)  a stock market transaction. 
D)  direct finance. 
A)  a bond market transaction. 
B)  indirect finance. 
C)  a stock market transaction. 
D)  direct finance. B

Question 4

Eighty-five percent of all firms employ ________ workers.

Accepted Answer

A)  only one or two 
B)  fewer than 20 
C)  50 or more 
D)  over 100 
A)  only one or two 
B)  fewer than 20 
C)  50 or more 
D)  over 100

Question 5

If you want to know the present value of $10,000 received in one year,and the interest rate is 4 percent,what formula can you use?

Accepted Answer

A)  Present value equals $10,000 times 0.04. 
B)  Present value equals $10,000 divided by 1.04 
C)  Present value equals 1.04 divided by $10,000. 
D)  Present value equals $10,000 times 1.04. 
A)  Present value equals $10,000 times 0.04. 
B)  Present value equals $10,000 divided by 1.04 
C)  Present value equals 1.04 divided by $10,000. 
D)  Present value equals $10,000 times 1.04.

Question 6

A corporation is owned by its

Accepted Answer

A)  board of directors. 
B)  stockholders. 
C)  employees. 
D)  CEO. 
A)  board of directors. 
B)  stockholders. 
C)  employees. 
D)  CEO.

Question 7

As a business type,corporations ________ in the United States.

Accepted Answer

A)  earn the majority of revenues 
B)  are the most common 
C)  are the least common 
D)  are subject to the fewest taxes 
A)  earn the majority of revenues 
B)  are the most common 
C)  are the least common 
D)  are subject to the fewest taxes

Question 8

How can a proprietorship or partnership raise funds for expansion?

Accepted Answer

A)  borrow from someone or an institution willing to lend the funds 
B)  reinvest profit back into the business 
C)  take on a partner or more partners 
D)  Any of these would generate funds for expansion. 
A)  borrow from someone or an institution willing to lend the funds 
B)  reinvest profit back into the business 
C)  take on a partner or more partners 
D)  Any of these would generate funds for expansion.

Question 9

A corporation is the type of business has ________ government rules and regulations affecting it.

Accepted Answer

A)  no 
B)  the fewest 
C)  the most 
D)  only federal 
A)  no 
B)  the fewest 
C)  the most 
D)  only federal

Question 10

How do a sole proprietorship and a corporation differ?

Accepted Answer

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

Question 11

A corporation's board of directors

Accepted Answer

A)  hire the managers of the corporation. 
B)  control the day-to-day activities of the corporation. 
C)  are personally liable for the debts of the corporation. 
D)  are the sole owners of the corporation. 
A)  hire the managers of the corporation. 
B)  control the day-to-day activities of the corporation. 
C)  are personally liable for the debts of the corporation. 
D)  are the sole owners of the corporation.

Question 12

Generally with bond ratings,the higher the rating,the ________ the interest rate an investor will receive and the ________ 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 13

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 14

When Internet coupon site Groupon sold stock to the public for the first time following its IPO in November 2011,it did so through the NASDAQ market.This was an example of Groupon using ________ to raise funds.

Accepted Answer

A)  indirect finance 
B)  direct finance 
C)  bonds 
D)  corporate governance 
A)  indirect finance 
B)  direct finance 
C)  bonds 
D)  corporate governance

Question 15

An asset is

Accepted Answer

A)  anything of value owned by a person or a firm. 
B)  a payment by a corporation to its shareholders. 
C)  a nonmonetary opportunity cost. 
D)  anything owed by a person or a firm. 
A)  anything of value owned by a person or a firm. 
B)  a payment by a corporation to its shareholders. 
C)  a nonmonetary opportunity cost. 
D)  anything owed by a person or a firm.

Question 16

Which type of business has the least government rules and regulations affecting it?

Accepted Answer

A)  sole proprietorship 
B)  partnership 
C)  corporation 
D)  They all have the same set of rules and regulations affecting them. 
A)  sole proprietorship 
B)  partnership 
C)  corporation 
D)  They all have the same set of rules and regulations affecting them.

Question 17

If a corporate bond with a face value of $5,000 pays yearly coupon payments of $100,what is the coupon rate?

Accepted Answer

A)  2% 
B)  5% 
C)  10% 
D)  20% 
A)  2% 
B)  5% 
C)  10% 
D)  20%

Question 18

The interest payment on a bond is called

Accepted Answer

A)  the coupon payment. 
B)  principal. 
C)  the interest rate. 
D)  the face value. 
A)  the coupon payment. 
B)  principal. 
C)  the interest rate. 
D)  the face value.

Question 19

In the United States,corporate profits are taxed at the corporate level and then are taxed again as personal income in the form of dividend payments.

Accepted Answer

A) True 
 B)False

Question 20

Suppose you hit a progressive jackpot on a slot machine in a casino in Atlantic City and are given the choice of the following prizes:
Prize 1: $150,000 to be received right away,with three additional payments of $150,000 to be received each year for the next three years.
Prize 2: $500,000 to be received right away.
If the interest rate is 5 percent,what is the present value of each prize?

Accepted Answer

Prize 1:Present value = $150,0

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?

Which of the following is a characteristic of stock?

If Southwest Airlines borrows $20 million from a bank to finance the renovation of their corporate offices,this is an example of

Eighty-five percent of all firms employ ________ workers.

If you want to know the present value of $10,000 received in one year,and the interest rate is 4 percent,what formula can you use?

A corporation is owned by its

As a business type,corporations ________ in the United States.

How can a proprietorship or partnership raise funds for expansion?

A corporation is the type of business has ________ government rules and regulations affecting it.

How do a sole proprietorship and a corporation differ?

A corporation's board of directors

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

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

When Internet coupon site Groupon sold stock to the public for the first time following its IPO in November 2011,it did so through the NASDAQ market.This was an example of Groupon using ________ to raise funds.

An asset is

Which type of business has the least government rules and regulations affecting it?

If a corporate bond with a face value of $5,000 pays yearly coupon payments of $100,what is the coupon rate?

The interest payment on a bond is called

In the United States,corporate profits are taxed at the corporate level and then are taxed again as personal income in the form of dividend payments.

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

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?

Which of the following is a characteristic of stock?

If Southwest Airlines borrows $20 million from a bank to finance the renovation of their corporate offices,this is an example of

Eighty-five percent of all firms employ ________ workers.

If you want to know the present value of $10,000 received in one year,and the interest rate is 4 percent,what formula can you use?

A corporation is owned by its

As a business type,corporations ________ in the United States.

How can a proprietorship or partnership raise funds for expansion?

A corporation is the type of business has ________ government rules and regulations affecting it.

How do a sole proprietorship and a corporation differ?

A corporation's board of directors

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

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

When Internet coupon site Groupon sold stock to the public for the first time following its IPO in November 2011,it did so through the NASDAQ market.This was an example of Groupon using ________ to raise funds.

An asset is

Which type of business has the least government rules and regulations affecting it?

If a corporate bond with a face value of $5,000 pays yearly coupon payments of $100,what is the coupon rate?

The interest payment on a bond is called

In the United States,corporate profits are taxed at the corporate level and then are taxed again as personal income in the form of dividend payments.

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

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