You own a stock that you think will produce a return of 11 percent in a good economy and 3 percent in
a poor economy. Given the probabilities of each state of the economy occurring, you anticipate that your
stock will earn 6.5 percent n
Last year, T-bills returned 2 percent while your investment in large-company stocks earned an average
of 5 percent. Which one of the following terms refers to the difference between these two rates of return?
A. risk premium
Which one of the following securities is used as a means of investing in a foreign stock that otherwise
could not be traded in the United States?
A. American Depository Receipt
B. Yankee bond
C. Yankee stock
Blackwell Brothers sells men's suits. The store offers a 1 percent discount if payment is received within
10 days. Otherwise, payment is due within 30 days. This credit offering is referred to as the:
A. terms of sale.
B. credit analysi
Forecasting risk is defined as the possibility that:
A. some proposed projects will be rejected.
B. some proposed projects will be temporarily delayed.
C. incorrect decisions will be made due to erroneous cash flow projections.
Yesterday, the president of RB Enterprises received a phone call from DLK, a competitor. DLK is a
sole proprietorship. An unexpected family situation has caused the owner to suddenly want to retire and
relocate closer to his family. Thu
What is the model called that determines the present value of a stock based on its next annual dividend,
the dividend growth rate, and the applicable discount rate?
A. zero growth
B. dividend growth
C. capital pricing
D. earnings capita
Activities of a firm which require the spending of cash are known as:
A. sources of cash.
B. uses of cash.
C. cash collections.
D. cash receipts.
E. cash on hand.
The sources and uses of cash over a stated period of time are reflecte
The difference between a firm's future cash flows if it accepts a project and the firm's future cash flows if
it does not accept the project is referred to as the project's:
A. incremental cash flows.
B. internal cash flows.
An ordinary annuity is best defined by which one of the following?
A. increasing payments paid for a definitive period of time
B. increasing payments paid forever
C. equal payments paid at regular intervals over a stated time period
A project has an initial cost of $27,400 and a market value of $32,600. What is the difference between
these two values called?
A. net present value
B. internal return
C. payback value
D. profitability index
E. discounted payback
Ron leases a car from Uptown Motors and pays $225 a month as a lease payment. Which one of the
following terms applies to Ron?
The party who owns a leased asset is called the:
The length of time between the purchase of inventory and the receipt of cash from the sale of that
inventory is called the:
A. operating cycle.
B. inventory period.
C. accounts receivable period.
D. accounts payable period.
E. cash cycl
Mary just purchased a bond which pays $60 a year in interest. What is this $60 called?
B. face value
D. call premium
Bert owns a bond that will pay him $75 each year in interest plus a $1,000 principal
schools, public health and welfare organizations, an air traffic control
agency). It might also provide more specific types of social
infrastructure in the form of academies to train police, mental health
workers, or other regulators. States invest in phy
economic transactions. Written contracts are less likely to be needed,
and they do not have to specify every possible contingency. Litigation
may be less frequent. Individuals in hightrust societies are also likely
to divert fewer resources to protecting
accountable to their constituents. Political markets are shaped by
their own market frameworks that include the rules of protected
speech, how district lines are drawn, and how candidates are selected.
They also depend upon whether votes are cast directly
passes. Since governments are elected nationally and locally and not
internationally, this will place them under increasing pressures to find
ways to deal with the increasing inequalities noted in Chapter 1. Since
many capitalist societies are governed by
postulated his pin factory. Though Smith did not use the term
increasing returns, it was clear from his analysis of the hugely
increased productivity of the workers as they specialized their efforts
and tools that they could increase their output more tha
number. Log of Cumulative Volume Unit S Cost 22 that looked not only
at existing market operations but also at the potential roles of new
suppliers, substitute products, alternative sources of supply, and thus
the overall structure of competition. While t
gained in precision it became value-neutral, as if market frameworks
did not embody societal choices and therefore values, e.g., for or
against labor or capital. As economics became more scientific,
economists all but ruled out the possibility that a soci
owned enterprises. 17 Figure 2.7 In addition to the formal organs of
government I have noted the presence of civil society, or the public.
The public can participate in the political process in many ways, for
example through political parties, non-governm
"Britain" and Northern Ireland are included in the surveys. We treat
Britain's values as representing the United Kingdom (Northern Ireland
accounts for less than 3 percent of the latter's population). Many
nonmarket economies were included in the 1990-199
fact that market frameworks are created through political processes
and Factor markets Land Capital Technolog Product markets Goods &
services Factor Firm Consumers Policy regime Regulator Social
Physical Infrastructu Political Civil society Politic al Cu
at least at first. 8 What happened to political economy? In the late
1880s economists made the pivotal discovery that goods and services
were more appropriately valued in terms of what they would fetch in
the market than by either how much they cost to pr
aggressive company could price down the learning curve to gain
market share, drive others out of business, and create a dominant
position. In such cases market-based solutions would yield a few
dominant players or even a monopoly and not an optimal soluti
governments in the more-trusting, more civic-minded northern and
central parts of Italy provide public services more effectively than do
those in the less-trusting, less civic south. Moreover, citizeninitiated
contacts with government officials in the sou
modeling perfect competition in a context of declining returns in part
because they had just the new tools to do so. The analysis of markets
with increasing returns received little scholarly attention for almost a
century. 12 When economists such as XXX C
from the premise that all markets should be liberalized to the
maximum extent possible are implicitly excluding such possibilities
from consideration, as the so-called Washington consensus approach
has tended to do since it was introduced in the 1980s. Th
ultimately enforce the laws and regulations that guide production and
trade. Since property rights are societal constructs and not gifts of
nature, these rights will only take proper account of societal costs and
benefits if they are established through a
who are not close friends or relatives, and the frequency of
encounters with such persons. People in low-trust environments will
transact more with close friends and relatives than with strangers,
compared with people in high-trust environments. If by "mo
relative prices of gasoline and pharmaceuticals between Europe and
the United States in Figure 2.9. The stylized differences in gasoline
prices in Figure 2.9 are accounted for largely by differences in sales
taxes among various countries. Thus, the United
Europeans have taken a more market oriented approach than the
United States. When it comes to pharmaceuticals the story is roughly
the reverse. The US, virtually alone among developed countries,
allows market pricing for drugs while most other developed c
assumptions and omitted some valuable information. For example, it
assumed that there were many buyers and sellers, and no single
economic actor had the market power to greatly influence prices in
the markets. It also assumed that productive processes wer
distinctive characteristics. One way to illustrate the differences
between the two perspectives, i.e., political economy and economics,
is to take note that market frameworks as well as underlying
institutions can be quite different from one country to an