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STRAYER FIN 534 WEEK 1 QUIZ 1, 15 MCQs. Get an A++.

Question 1You recently sold 100 shares of your new company, XYZ Corporation, to your brother at a family reunion. At the reunion your brother gave you a check for the stock and you gave your brother the stock certificates. Which of the following statements best describes this transaction?1) This is an example of an exchange of physical assets.2) This is an example of a primary market transaction.3) This is an example of a direct transfer of capital.4) This is an example of a money market transaction.5) This is an example of a derivatives market transaction.Question 2Which of the following statements is CORRECT?1) While the distinctions are blurring, investment banks generally specialize in lending money, whereas commercial banks generally help companies raise capital from other parties2) A liquid security is a security whose value is derived from the price of some other “underlying” asset3) Money market mutual funds usually invest most of their money in a well-diversified portfolio of liquid common stocks.4) Money markets are markets for long-term debt and common stocks.5) The NYSE operates as an auction market, whereas the Nasdaq is a dealer marketQuestion 3 Which of the following statements is CORRECT?1) The NYSE does not exist as a physical location; rather it represents a loose collection of dealers who trade stock electronically.2) An example of a primary market transaction would be your uncle transferring 100 shares of Wal-Mart stock to you as a birthday gift.3) Capital market instruments include both long-term debt and common stocks.4) If your uncle in New York sold 100 shares of Microsoft through his broker to an investor in Los Angeles, this would be a primary market transaction. 5) While the two frequently perform similar functions, investment banks generally specialize in lending money, whereas commercial banks generally help companies raise large blocks of capital from investors.Question 4Which of the following statements is CORRECT?1) It is usually easier to transfer ownership in a corporation than it is to transfer ownership in a sole proprietorship2) Corporate shareholders are exposed to unlimited liability.3) Corporations generally face fewer regulations than sole proprietorships.4) Corporate shareholders are exposed to unlimited liability, and this factor may be compounded by the tax disadvantages of incorporation.5) There is a tax disadvantage to incorporation, and there is no way any corporation can escape this disadvantage, even if it is very smallQuestion 5Which of the following statements is CORRECT?1) One disadvantage of operating as a corporation rather than as a partnership is that corporate shareholders are exposed to more personal liability than partners2) 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 makes3) 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 returns4) 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 returns5) Relative to sole proprietorships, corporations generally face fewer regulations, and this makes it easier for corporations to raise capitalQuestion 6 Suppose the U.S. Treasury announces plans to issue $50 billion of new bonds. Assuming the announcement was not expected, what effect, other things held constant, would that have on bond prices and interest rates?1) Prices and interest rates would both rise.2) Prices would rise and interest rates would decline.3) Prices and interest rates would both decline.4) There would be no changes in either prices or interest rates.5) Prices would decline and interest rates would rise.Question 7Which of the following statements is CORRECT?1) Corporations are at a disadvantage relative to partnerships because they have to file more reports to state and federal agencies, including the Securities and Exchange Administration, even if they are not publicly owned2) In a regular partnership, liability for the firm’s debts is limited to the amount a particular partner has invested in the business3) A fast-growth company would be more likely to set up as a partnership for its business organization than would a slow-growth company4) Partnerships have difficulty attracting capital in part because of their unlimited liability, the lack of impermanence of the organization, and difficulty in transferring ownership5) A major disadvantage of a partnership relative to a corporation as a form of business organization is the high cost and practical difficulty of its formationQuestion 8Which of the following statements is CORRECT?1) In a regular partnership, liability for other partners’ misdeeds is limited to the amount of a particular partner’s investment in the business2) Partnerships have more difficulty attracting large amounts of capital than corporations because of such factors as unlimited liability, the need to reorganize when a partner dies, and the illiquidity (difficulty buying and selling) of partnership interests3) A slow-growth company, with little need for new capital, would be more likely to organize as a corporation than would a faster growing company4) In a limited partnership, the limited partners have voting control, while the general partner has operating control over the business. Also, the limited partners are individually responsible, on a pro rata basis, for the firm’s debts in the event of bankruptcy.5) A major disadvantage of all partnerships relative to all corporations is the fact that federal income taxes must be paid by the partners rather than by the firm itselfQuestion 9Which of the following statements is CORRECT?1) If you purchase 100 shares of Disney stock from your brother-in-law, this is an example of a primary market transaction.2) If Disney issues additional shares of common stock through an investment banker, this would be a secondary market transaction.3) The NYSE is an example of an over-the-counter market.4) Only institutions, and not individuals, can engage in derivative market transactions.5) As they are generally defined, money market transactions involve debt securities with maturities of less than one yearQuestion 10Which of the following factors would be most likely to lead to an increase in interest rates in the economy?1) Households reduce their consumption and increase their savings2) The Federal Reserve decides to try to stimulate the economy.3) There is a decrease in expected inflation4) The economy falls into a recession5) Most businesses decide to modernize and expand their manufacturing capacity, and to install new equipment to reduce labor costsQuestion 11Which of the following statements is CORRECT?1) Hedge funds are legal in Europe and Asia, but they are not permitted to operate in the United States2) Hedge funds have more in common with commercial banks than with any other type of financial institution3) Hedge funds have more in common with investment banks than with any other type of financial institution4) Hedge funds are legal in the United States, but they are not permitted to operate in Europe or Asia5) The justification for the “light” regulation of hedge funds is that only “sophisticated” investors with high net worths and high incomes are permitted to invest in these funds, and such investors supposedly can do the necessary “due diligence” on their own rather than have it done by the SEC or some other regulatorQuestion 12Which of the following statements is CORRECT?1) The New York Stock Exchange is an auction market with a physical location2) Capital market transactions involve only the purchase and sale of equity securities, i.e., common stocks3) If an investor sells shares of stock through a broker, then this would be a primary market transaction.4) Consumer automobile loans are evidenced by legal documents called “promissory notes,” and these individual notes are traded in the money market5) Consumer automobile loans are evidenced by legal documents called “promissory notes,” and these individual notes are traded in the money marketQuestion 13Which of the following statements is CORRECT?1) The corporate bylaws are a standard set of rules established by the state of incorporation. These rules are identical for all corporations in the state, and their purpose is to ensure that the firm’s managers run the firm in accordance with state laws2) The corporate charter is a standard document prescribed by the state of incorporation, and its purpose is to ensure that the firm’s managers run the firm in accordance with state laws. Procedures for electing corporate directors are contained in bylaws, while the declaration of the activities that the firm will pursue and the number of directors are included in the corporate charter.3) Companies must establish a home office, or domicile, in a particular state, and that state must be the one in which most of their business (sales, manufacturing, and so forth) is conducted4) Attorney fees are generally involved when a company develops its charter and bylaws, but since these documents are voluntary, a new corporation can avoid these costs by deciding not to have either a charter or bylaws5) The corporate charter is concerned with things like what business the company will engage in, whereas the bylaws are concerned with things like procedures for electing the board of directorsQuestion 14Which of the following statements is CORRECT?1) If expected inflation increases, interest rates are likely to increase2) If individuals in general increase the percentage of their income that they save, interest rates are likely to increase3) If companies have fewer good investment opportunities, interest rates are likely to increase4) Interest rates on all debt securities tend to rise during recessions because recessions increase the possibility of bankruptcy, hence the riskiness of all debt securities5) Interest rates on long-term bonds are more volatile than rates on short-term debt securities like T-billsQuestion 15The primary operating goal of a publicly-owned firm interested in serving its stockholders should be to ____1) maximize its expected total corporate income2) maximize its expected EPS3) minimize the chances of losses4) maximize the stock price per share over the long run, which is the stock’s intrinsic value5) maximize the stock price on a specific target date

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