1) The current market interest rate declines from 10 percent to 8 percent. Due to interest rate reinvestment risk, the bondholders will:

a.receive a lower market value for the bond.

b.receive a higher principal at the maturity of the bond.

c.call back the bond before its maturity.

d.earn a lower return on the reinvested cash flows.

e.receive a lower coupon interest than mentioned in the bond indenture.

2) Identify a true statement about a limited liability company (LLC).

a.A limited liability company can be taxed as a corporation only.

b.One of the owners of a limited liability company is designated as a general partner with unlimited personal financial liability.

c.A limited liability company has no more than 100 stockholders.

d.One of the owners of a limited liability company can participate in the management of the business.

e.A limited liability company can have more than one type of stock outstanding.

3) Which of the following types of stocks pay its investors a fixed amount of dividends?

a.Preemptivestocks

b.Growth stocks

c.Common stocks

d.Preferred stocks

e.Founders' shares

4) The form of informational market efficiency that states that current market prices of securities reflect all information contained in past price movements is known as the _____.

a.economic efficiency

b.semistrong-form efficiency

c.strong-form efficiency

d.weak-form efficiency

e.real-time efficiency

5) The decision to limit salaries of executives whose companies received Troubled Asset Relief Program (TARP) funds was under which of the following acts?

a.Basel III Accord (2010)

b.Emergency Economic Stabilization Act of 2008

c.Dodd-Frank Wall Street Reform and Consumer Protection Act

d.Wall Street Transparency and Accountability Act

e.Securities and Exchange Commission Act

6) Identify a true statement about an S corporation.

a.An S Corporation is required to have more than 100 stockholders.

b.An S Corporation is required to have more than one type of stock outstanding.

c.The income of an S Corporation passes through the company to the owners.

d.The income of an S Corporation is taxed twice, at the corporate level and the owner level.

e.The income of an S Corporation is taxed as capital gains to the owners.

7) As a bond's rating serves as an indicator of its default risk, the rating has a direct, measurable influence on the firm's:

a.earnings per share and dividend payments.

b.cost of using such debt and the bond's interest rate.

c.ability to procure raw material for production.

d.tax liability to the federal government.

e.current assets and the bond's maturity value.

8) Which of the following results is due to the greater concentration of ownership in non-U.S. firms?

a.The greater concentration of ownership in non-U.S. firms makes it easy to change managers.

b.The greater concentration of ownership in non-U.S. firms permits greater monitoring and control by individuals or groups.

c.The greater concentration of ownership in non-U.S. firms results in difficult access to credit in times of financial difficulty.

d.The greater concentration of ownership in non-U.S. firms results in greater focus of managers on short-term goals of the firm.

e.The greater concentration of ownership in non-U.S. firms results in reduced involvement of stockholders in the firms' daily operations.

9) As financial institutions in other countries are generally less regulated than in the United States, _____.

a.foreign banks invest in less socially responsible companies only

b.foreign banks provide businesses with a greater variety of services than U.S. banks

c.foreign banks invest to maximize investment corporations' earnings

d.foreign banks provide investment opportunities in illegal business plans also

e.foreign banks are required to fulfill the regulations of the Sarbanes-Oxley Act

10) _____ is the chance that a financial asset will not earn the return promised.

a.Maturity

b.Production opportunity

c.Time preference for consumption

d.Risk

e.Inflation