1 Assume a firm has pursued a goal of maximizing profits in a purely literal sense and, as a result, has had positive, as well as growing profits since their inception. Which of the following statements is true? The firm ... a. is pursuing the primary goal of the organization b. is acting in the best interests of all stakeholders C. is, by definition, also maximizing shareholders' wealth d. may possibly be heading toward insolvency (i.e. bankruptcy) (due to insufficient cash flow) e. None of the above or insufficient information 2 If market interest rates are currently 15% and your investment provides you this 15% return, does that imply that you are 15% more wealthy (after vs before this investment return)? Assume wealth is defined as the ability to consume (purchase) goods or services. a. Yes, because with inflation you do indeed have 15% more money b. Yes, because with inflation 15% more money does imply 15% more wealth. c. No, because with inflation 15% more money does not imply 15% more wealth. d. No, because with inflation 15% more money means your wealth increased more than 15%. e. None of the above or insufficient information 3 The primary goal of a publicly-owned firm interested in serving its stockholders should be to a. Maximize expected total corporate profit. B. Maximize expected EPS. C. Minimize the chances of losses. D. Maximize the stock price per share, le owners' wealth. e. Maximize expected net income. 4 Which of the following would generally be considered the most risky (with respect to volatility of returns)? a. An investment in a portfolio of common stocks b. An investment in a single common stock randomly selected C. An investment in a single corporate bond randomly selected d. an investment in a portfolio of corporate bonds e. do not know