Fin534 Quiz 1

Satisfactory Essays
CHAPER 1
1. Which of the following statements is CORRECT?
Answer

One disadvantage of operating as a corporation rather than as a partnership is that corporate shareholders are exposed to more personal liability than partners. There is no good reason to expect a firm 's stockholders and bondholders to react differently to the types of new asset investments a firm makes. Bondholders are generally more willing than stockholders to have managers invest in risky projects with high potential returns as opposed to safer projects with lower expected returns. Stockholders are generally more willing than bondholders to have managers invest in risky projects with high potential returns as opposed to safer projects with lower expected returns. Relative to sole proprietorships, corporations generally face fewer regulations, and this makes it easier for corporations to raise capital.
2 points
Question 2
1.
Which of the following is a primary market transaction?
Answer
You sell 200 shares of IBM stock on the NYSE through your broker. IBM issues 2,000,000 shares of new stock and sells them to the public through an investment banker. You buy 200 shares of IBM stock from your brother. The trade is not made through a broker--you just give him cash and he gives you the stock. One financial institution buys 200,000 shares of IBM stock from another institution. An investment banker arranges the transaction. You invest $10,000 in a mutual fund, which then uses the money to buy $10,000 of IBM shares on the NYSE. 2 points
Question 3
1.
Money markets are markets for
Answer
Foreign stocks. Consumer

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