Midterm Study Guide

Fin 5170 Fall 2009 The exam will consist on multiple choices, and problems and may be an essay question. I will ask a maximum of two questions taken from the following material covered in class Chapter 1 Describe the concept of agency problems and different ways to ameliorate agency problems in a corporation Chapter 3 Example 3.7 (pages 65-66) Use the concept of arbitrage to explain the price of Security A in table 3.8, and Security B in table 3.9). Compute the risk premium of both securities. Example 3.10 in page 72 Example 3.11 in page 74 Problems 14, 17, 18 (pages 78-80) You will also have the opportunity to answer several questions from the next pages Chapter 1 - The Corporation 1.1 The Four Types of Firms   2) Which of the following organization forms for a business does not avoid double taxation A) Limited Partnership B) C Corporation C) S Corporation D) Limited Liability Company Answer B  3) Which of the following organization forms has the most revenue A) S Corporation B) Limited Partnership C) C Corporation D) Limited Liability Company Answer C  4) Which of the following organization forms accounts for the greatest number of firms A) S Corporation B) Limited Partnership C) Sole Proprietorship D) C Corporation Answer C   5) Which of the following is NOT an advantage of a sole proprietorship A) Single taxation B) Ease of setup C) Limited liability D) No separation of ownership and control Answer C   6) Which of the following statements regarding limited partnerships is true A) There is no limit on a limited partners liability. B) A limited partners liability is limited by the amount of their investment. C) A limited partner is not liable until all the assets of the general partners have been exhausted. D) A general partners liability is limited by the amount of their investment. Answer B  7) Which of the following is / are an advantage of incorporation A) Access to capital