ch5_Options_examples - 1. The primary goal of a...

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1. The primary goal of a publicly-owned firm interested in serving its stockholders should be to (Points: 1) a. Maximize expected total corporate profit. b. Maximize expected EPS. c. Minimize the chances of losses. d. Maximize the stock price per share. e. Maximize expected net income. 2. Which of the following actions are likely to reduce agency conflicts between stockholders and managers? (Points: 1) a. Paying managers a large fixed salary. b. Increasing the threat of corporate takeover. c. Placing restrictive covenants in debt agreements. d. All of the statements above are correct. e. Statements b and c are correct. 3. Which of the following mechanisms is used to motivate managers to act in the interests of shareholders? (Points: 1) a. Bond covenants. b. The threat of a takeover. c. Executive stock options. d. Statements a and b are correct. e. Statements b and c are correct. 4. Which of the following statements is most correct? (Points: 1) a. Sarbanes-Oxley requires the Securities Exchange Commission to audit public companies’ financial statements. b. Sarbanes-Oxley made it illegal for company executives to trade on insider information. c. Sarbanes-Oxley requires the Chairman of the Board of Directors to sign and certify the company’s financial statements.
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d. Sarbanes-Oxley requires the CEO sign and certify the company’s financial statements. e. Sarbanes-Oxley requires company executives to disclose their fraudulent activities “in a timely and accurate manner.” 5. Jane holds a large diversified portfolio of 100 randomly selected stocks and the portfolio’s beta = 1.2. Each of the individual stocks in her portfolio has a standard deviation of 20 percent. Jack has the same amount of money invested in a single stock with a beta equal to 1.6 and a standard deviation of 20 percent. Which of the following statements is most correct? (Points: 1) a. Jane’s portfolio has a larger amount of company-specific risk since she is holding more stocks in her portfolio. b. Jane has a higher required rate of return, since she is more diversified. c. Jane’s portfolio has less market risk since it has a lower beta. d. Statements b and c are correct. e. None of the statements above is correct. 6. Which is the best measure of risk for an asset held in isolation? Which is the best
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ch5_Options_examples - 1. The primary goal of a...

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