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1 Practice Test Macroeconomics Spring 2008 Chapter 13 Saving, Investment, and the Financial System MULTIPLE CHOICE 1. Papa Mario's Pizza Company sells common stock. a. They are using equity financing and the return shareholders earn is fixed. b. They are using equity financing and the return shareholders earn depends on how profitable the company is. c. They are using debt financing and the return shareholders earn is fixed. d. They are using debt financing and the return shareholders earn depends on how profitable the company is. ANS: B DIF: 1 REF: SECTION: 13.1 OBJ: TYPE: M 2. People who buy newly issued stock in a corporation such as Rockwood Pottery provide a. debt finance and so become part owners of Rockwood. b. debt finance and so become creditors of Rockwood. c. equity finance and so become part owners of Rockwood. d. equity finance and so become creditors of Rockwood. ANS: C DIF: 1 REF: SECTION: 13.1 OBJ: TYPE: M 3. If Huedepool Beer runs into financial difficulty, the stockholders as a. part owners of Huedepool are paid before bondholders get paid anything at all. b. part owners of Huedepool are paid after bondholders get paid. c. creditors of Huedepool are paid before bondholders get paid anything at all. d. creditors of Huedepool are paid after bondholders get paid. ANS: B DIF: 1 REF: SECTION: 13.1 OBJ: TYPE: M 4. The price of stock traded on exchanges are determined by a. the Corporate Stock Administration. b. NASDAQ. c. the supply and demand for the stock. d. All of the above are correct. ANS: C DIF: 1 REF: SECTION: 13.1 OBJ: TYPE: M 5. Buskins Corporation has issued 2 million shares of stocks. Their earnings were $10 million dollars of which they retained $6 million. What was the dividend per share? a. $2. b. $3. c. $5 d. None of the above are correct. ANS: A DIF: 1 REF: SECTION: 13.1 OBJ: TYPE: M 2 6. Which of the following is a financial intermediary? a. a mutual fund b. the stock market c. a U.S. government bond d. None of the above are correct. ANS: A DIF: 1 REF: SECTION: 13.1 OBJ: TYPE: M 7. A mutual fund a. is a financial market where small firms mutually agree to sell stocks and bonds to raise funds. b. is funds set aside by local governments to lend to small firms who want to invest in projects that are mutually beneficial to the firm and community. c. sells stocks and bonds on behalf of small and less known firms who would otherwise have to pay high interest to obtain credit. d. is an institution that sells shares to the public and uses the proceeds to buy a selection of various types of stocks, bonds, or both stocks and bonds. ANS: D DIF: 1 REF: SECTION: 13.1 OBJ: TYPE: M 8. The primary advantage of mutual funds is that they a. always make a return that "beats the market." b. allow people with small amounts of money to diversify.... View Full Document

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