1 IMPORTANT NOTES: 1. The midterm exam will cover material from chapters 1, 2, 29, and other related material, which we covered in class or relevant assignments. 2. These study questions are NOT substitutes for the required readings and other assignments and for studying the relevant materials we have discussed in class. These questions are intended to help students familiarize themselves with them and reinforce the understanding of the relevant material by going back to them in the textbook or notes. 3. I will NOT provide answers to the questions in this handout, as I have indicated in class and/or in the Blackboard announcement. 4. I reserve the right to make any changes to these study questions for the ACTUAL exam. 5. There WILL BE on the exam a few problems or short-answer essay-type questions, which will NOT be drawn from this study question handout. But, the questions will be closely related to what we have discussed in class and to homework, class activities or quizzes. 6. A FORMULA sheet, which is similar to the formula sheet you will have access to during the exam, is attached to this study guide. This formula sheet may not be exhaustive; so, you are responsible for studying any other formula that is not included here but that is believed to have been covered in class discussions. 7. No presumption should be made that this study-question format will be repeated in the future. 8. The use of electronic device (smartphone, etc.) will NOT be allowed during the exam. 9. Once the exam has started, no movement in and out of the class for any reason other than documented health-related will be allowed. Please, make sure you are ready to sustain a little more than an hour-long session with no need to go out of the room. 10. Please report to me any typo or inaccuracies. Thank you! 11) What strategies are available to shareholders to help ensure that managers are motivated to act in the interest of the shareholders rather than their own interest? Answer: A) On Nasdaq, stocks can and do have multiple market makers who compete with each other. Each market maker must post bid and ask prices in the Nasdaq network where they can be viewed by all participants. B) Bid prices exceed ask prices. C) Because customers always buy at the ask and sell at the bid, the bid-ask spread is a transaction costinvestors have to pay in order to trade. D) On the floor of the NYSE, market makers(known on the NYSE as specialists) match buyers and sellers. 1. The threat of a hostile takeover 2. Shareholder initiatives 3. Performance based compensation 6) Which of the following statements is FALSE?