Question 1

Corporations account for a ____ proportion of U.S.firms and a ____ proportion of sales by U.S.firms.

Accepted Answer

A) small; small 
B) small; large 
C) large; small 
D) large; large 
A) small; small 
B) small; large 
C) large; small 
D) large; large B

Question 2

If a person owns 2,000 shares in a corporation which has issued 200,000 shares of stock,that person owns ____ of the company and is entitled to ____ of the dividends.

Accepted Answer

A) 1 percent; 1 percent 
B) 2 percent; 2 percent 
C) 10 percent; 10 percent 
D) 20 percent; 20 percent 
A) 1 percent; 1 percent 
B) 2 percent; 2 percent 
C) 10 percent; 10 percent 
D) 20 percent; 20 percent A

Question 3

Why is plowback the overwhelming favorite among choices of sources of funds for financing corporate investment?

Accepted Answer

Plowback is usually less risky to management.It does not require prior scrutiny by the SEC nor does it depend on the availability of customers.The alternative sources,stock and bond issues,involve expensive and lengthy processes.

Question 4

When bond prices rise,

Accepted Answer

A) stock prices must fall. 
B) interest rates must fall. 
C) interest rates must rise. 
D) bankruptcies generally increase. 
A) stock prices must fall. 
B) interest rates must fall. 
C) interest rates must rise. 
D) bankruptcies generally increase.

Question 5

Which of the following was designed to head off panics among market participants and forestall crashes like the ones in October 1929 and October 1987?

Accepted Answer

A) Program trading 
B) Circuit breakers 
C) Derivatives 
D) Volatility index 
A) Program trading 
B) Circuit breakers 
C) Derivatives 
D) Volatility index

Question 6

Securities markets perform a valuable economic function because they provide

Accepted Answer

A) an opportunity for investors to make money in a short time. 
B) the principal indicator of the performance of the U.S. economy. 
C) an easy way to transfer corporate securities, thereby reducing risk to investors. 
D) assurance that stock purchasers can get back the purchase price of their stock. 
A) an opportunity for investors to make money in a short time. 
B) the principal indicator of the performance of the U.S. economy. 
C) an easy way to transfer corporate securities, thereby reducing risk to investors. 
D) assurance that stock purchasers can get back the purchase price of their stock.

Question 7

A futures contract is an agreement to buy a commodity at a specific future date,at a price set today.

Accepted Answer

A) True 
 B)False

Question 8

Double taxation of corporate earnings means

Accepted Answer

A) for individuals who get dividends on personal income, tax rates are twice as high as for wage earners. 
B) stockholders pay personal income taxes and corporation taxes on profits. 
C) stockholders don't get the plowback but still pay taxes on it. 
D) the corporation tax raises stock prices so individuals also pay a capital gains tax in addition to a tax on dividends. 
A) for individuals who get dividends on personal income, tax rates are twice as high as for wage earners. 
B) stockholders pay personal income taxes and corporation taxes on profits. 
C) stockholders don't get the plowback but still pay taxes on it. 
D) the corporation tax raises stock prices so individuals also pay a capital gains tax in addition to a tax on dividends.

Question 9

Stock markets deal

Accepted Answer

A) almost exclusively in newly issued stocks. 
B) in previously issued stocks. 
C) in both newly issued and previously issued stocks, but they do not deal in bonds. 
D) in large amounts of both newly issued and previously issued stocks and bonds. 
A) almost exclusively in newly issued stocks. 
B) in previously issued stocks. 
C) in both newly issued and previously issued stocks, but they do not deal in bonds. 
D) in large amounts of both newly issued and previously issued stocks and bonds.

Question 10

What is the stock market's role in achieving efficient use of resources?

Accepted Answer

Investors channel their money to compani

Question 11

As an investor,would you agree to the statement "put all your eggs in one basket?" Substantiate your answer.

Accepted Answer

No.Perhaps the first rule of safe invest

Question 12

Which of the following is a series of rules that stops trading on an exchange for a relatively short period of time?

Accepted Answer

A) program trading 
B) market limits 
C) stop orders 
D) circuit breakers 
A) program trading 
B) market limits 
C) stop orders 
D) circuit breakers

Question 13

"Never put all your eggs in one basket." This saying refers to the concept of

Accepted Answer

A) averaging. 
B) market timing. 
C) diversification. 
D) leveraging. 
A) averaging. 
B) market timing. 
C) diversification. 
D) leveraging.

Question 14

During the financial crisis of 2007-2009,new stock sales represented a total of ____ in corporate financing.

Accepted Answer

A) $2 billion 
B) $38 billion 
C) $1 trillion 
D) -$65 billion 
A) $2 billion 
B) $38 billion 
C) $1 trillion 
D) -$65 billion

Question 15

An individual who acquires a bond from a corporation

Accepted Answer

A) lends money to the corporation. 
B) borrows money from the corporation. 
C) buys part of the corporation. 
D) promises to pay part of any debts of the corporation. 
A) lends money to the corporation. 
B) borrows money from the corporation. 
C) buys part of the corporation. 
D) promises to pay part of any debts of the corporation.

Question 16

If the random walk theory is correct,a prudent investor might choose her stock portfolio by

Accepted Answer

A) throwing darts at the newspaper's financial page. 
B) spending money to consult a stock forecaster. 
C) spending time analyzing past stock performance. 
D) not investing in stocks at all, since price behavior is completely erratic. 
A) throwing darts at the newspaper's financial page. 
B) spending money to consult a stock forecaster. 
C) spending time analyzing past stock performance. 
D) not investing in stocks at all, since price behavior is completely erratic.

Question 17

In the traditional view,stocks are ____ than bonds to the firm that issues them and ____ than bonds to the investor who purchases them.

Accepted Answer

A) less risky; less risky 
B) less risky; riskier 
C) riskier; less risky 
D) riskier; riskier 
A) less risky; less risky 
B) less risky; riskier 
C) riskier; less risky 
D) riskier; riskier

Question 18

Explain how derivates were used to increase risk making the financial crisis of 2007-2009 more severe.

Accepted Answer

U.S.investment banks bought many Credit

Question 19

The average return on an S&P 500 Index fund between 1980 and 2005 was

Accepted Answer

A) -2.3%. 
B) 1.9%. 
C) 5.1%. 
D) 12.3%. 
A) -2.3%. 
B) 1.9%. 
C) 5.1%. 
D) 12.3%.

Question 20

A technique that can be employed to make a portfolio less risky than any of its individual securities is

Accepted Answer

A) plowback. 
B) diversification. 
C) programmed trading. 
D) speculation. 
A) plowback. 
B) diversification. 
C) programmed trading. 
D) speculation.

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

Corporations account for a ____ proportion of U.S.firms and a ____ proportion of sales by U.S.firms.

If a person owns 2,000 shares in a corporation which has issued 200,000 shares of stock,that person owns ____ of the company and is entitled to ____ of the dividends.

Why is plowback the overwhelming favorite among choices of sources of funds for financing corporate investment?

When bond prices rise,

Which of the following was designed to head off panics among market participants and forestall crashes like the ones in October 1929 and October 1987?

Securities markets perform a valuable economic function because they provide

A futures contract is an agreement to buy a commodity at a specific future date,at a price set today.

Double taxation of corporate earnings means

Stock markets deal

What is the stock market's role in achieving efficient use of resources?

As an investor,would you agree to the statement "put all your eggs in one basket?" Substantiate your answer.

Which of the following is a series of rules that stops trading on an exchange for a relatively short period of time?

"Never put all your eggs in one basket." This saying refers to the concept of

During the financial crisis of 2007-2009,new stock sales represented a total of ____ in corporate financing.

An individual who acquires a bond from a corporation

If the random walk theory is correct,a prudent investor might choose her stock portfolio by

In the traditional view,stocks are ____ than bonds to the firm that issues them and ____ than bonds to the investor who purchases them.

Explain how derivates were used to increase risk making the financial crisis of 2007-2009 more severe.

The average return on an S&P 500 Index fund between 1980 and 2005 was

A technique that can be employed to make a portfolio less risky than any of its individual securities is

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 I: the Price System

The Shortcomings of Free Markets

The Markets Prime Achievement: Innovation and Growth

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

International Trade and Comparative Advantage

Filters

Corporations account for a proportion of U.S.firms and a proportion of sales by U.S.firms.

If a person owns 2,000 shares in a corporation which has issued 200,000 shares of stock,that person owns of the company and is entitled to of the dividends.

In the traditional view,stocks are than bonds to the firm that issues them and than bonds to the investor who purchases them.