tb07 - Chapter 7 The Stock Market, the Theory of Rational...

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Chapter 7 The Stock Market, the Theory of Rational Expectations, and the Efficient Markets Hypothesis T Multiple Choice 1) Stockholders’ rights include (a) the right to vote. (b) the right to manage. (c) primary claims on all cash flows. (d) ownership of bonds. (e) all of the above. Answer: A Question Status: New 2) Stockholders’ rights include (a) the right to manage. (b) the right to change personnel policy. (c) the right to veto management’s decisions. (d) primary claim on all of a company’s assets. (e) residual claim on all cash flows. Answer: D Question Status: New 3) Stockholders are residual claimants, meaning that they (a) have the first priority claim on all of a company’s assets. (b) are liable for all of a company’s debts. (c) will never share in a company’s profits. (d) receive the remaining cash flow after all other claims are paid. (e) have a higher claim on cash flow than bond holders. Answer: C Question Status: New
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238 Frederic S. Mishkin • Economics of Money, Banking, and Financial Markets, Seventh Edition 4) A stockholder’s ownership of a company’s stock gives her the right to (a) vote and be the primary claimant of all cash flows. (b) vote and be the residual claimant of all cash flows. (c) manage and assume responsibility for all liabilities. (d) vote and assume responsibility for all liabilities. (e) manage and be the residual claimant of all cash flows. Answer: B Question Status: New 5) Dividends are paid from (a) liabilities. (b) debts. (c) net earnings. (d) both (a) and (b) of the above. (e) none of the above. Answer: C Question Status: New 6) Payments of net earnings to shareholders are called (a) dividends. (b) capital gains. (c) profits. (d) loans. (e) interest. Answer: A Question Status: New 7) Periodic payments of net earnings to shareholders are known as (a) capital gains. (b) dividends. (c) profits. (d) all of the above. (e) both (a) and (b) of the above. Answer: B Question Status: New 8) Dividends are periodic payments of net earnings to (a) employees. (b) managers. (c) creditors. (d) shareholders. (e) all of the above. Answer: D Question Status: New
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Chapter 7 The Stock Market, the Theory of Rational Expectations, and the Efficient Markets Hypothesis 239 9) The value of an investment can be found by computing the present value of all future (a) debts. (b) sales. (c) liabilities. (d) cash flows. (e) risks. Answer: D Question Status: New 10) The value of any investment is found by (a) computing the present value of all future sales. (b) computing the present value of all future liabilities. (c) computing the future value of all sales. (d) computing the present value of all future cash flows. (e) computing the future value of all future expenses. Answer: D Question Status: New 11) In the one-period valuation model, the value of an investment depends upon (a) only the present value of the expected sales price.
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This note was uploaded on 10/17/2011 for the course ECON 317 taught by Professor Guidry during the Spring '11 term at Nicholls State.

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tb07 - Chapter 7 The Stock Market, the Theory of Rational...

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