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Chapter 14 Theory of Financial Structure 14.1 Multiple Choice Questions 1) Of the following sources of external finance for American nonfinancial businesses, the least important is A) loans from banks. B) stocks. C) bonds and commercial paper. D) loans from other financial intermediaries. Answer: B 2) Of the following sources of external finance for American nonfinancial businesses, the most important is A) loans from banks. B) stocks. C) bonds and commercial paper. D) loans from other financial intermediaries. Answer: A 3) Of the sources of external funds for nonfinancial businesses in the United States, corporate bonds and commercial paper account for approximately _____ of the total. A) 35 percent B) 10 percent C) 50 percent D) 5 percent Answer: A 4) Of the sources of external funds for nonfinancial businesses in the United States, stocks account for approximately _____ of the total. A) 10 percent B) 20 percent C) 30 percent D) 40 percent Answer: A 188 5) With regard to external sources of financing for nonfinancial businesses in the United States, which of the following are accurate statements? A) Marketable securities account for a larger share of external business financing in the United States than in most other countries. B) Since 1970, less than 5 percent of newly issued corporate bonds and commercial paper have been sold directly to American households. C) The stock market accounted for a sizeable fraction of the financing of American businesses in the 1970-1996 period. D) All of the above. E) Only (A) and (B) of the above. Answer: E 6) With regard to external sources of financing for nonfinancial businesses in the United States, which of the following are accurate statements? A) Direct finance is used in less than 5 percent of the external financing of American businesses. B) Only large, well-established corporations have access to securities markets to finance their activities. C) Bank loans in the United States provide four times more financing of corporate activities than do stock markets. D) All of the above. E) Only (A) and (B) of the above. Answer: D 7) (I) In the United States bank loans are the most important source of external funds for nonfinancial businesses. (II) In Germany and Japan, issuing stocks and bonds is the most important source of external for nonfinancial businesses. A) (I) is true, (II) false. B) (I) is false, (II) true. C) Both are true. D) Both are false. Answer: A 8) Which of the following is not one of the eight basic facts about financial structure? A) Debt contracts are typically extremely complicated legal documents that place substantial restrictions on the behavior of the borrower. B) Indirect finance, which involves the activities of financial intermediaries, is many times more important than direct finance, in which businesses raise funds directly from lenders in financial markets.... View Full Document

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