The "new issues market" -- where first-time security issues are offered for sale -- is called the secondary market.

The "new issues market" -- where first-time security issues are offered for sale -- is called the secondary market.

Answer: False

The role of financial markets is to bring savers and users of funds together at the least possible cost and inconvenience.

The role of financial markets is to bring savers and users of funds together at the least possible cost and inconvenience.

Answer: True

A security is an instrument that represents a financial liability to the holder and a financial asset to the issuer.

A security is an instrument that represents a financial liability to the holder and a financial asset to the issuer.

Answer: False

A corporation is a "legal person" that can be sued.

A corporation is a "legal person" that can be sued.

Answer: True

In a general partnership, each partner is personally responsible for only the first $335,000 of the company's liabilities.

In a general partnership, each partner is personally responsible for only the first $335,000 of the company's liabilities.

Answer: False

In a sole proprietorship, the owner is personally responsible for only the first $335,000 of the company's debt.

In a sole proprietorship, the owner is personally responsible for only the first $335,000 of the company's debt.

Answer: False

Assume that a "temporary" additional (US federal tax related) first-year bonus depreciation of 50 percent applies to a new, $100,000 piece of equipment purchased by Bellemans Chocolatier, Inc. The asset has a $10,000 estimated final salvage value. If this asset is fully depreciated for tax purposes over its useful life, the overall amount that Bellemans will have depreciated for tax purposes is .

Assume that a "temporary" additional (US federal tax related) first-year bonus depreciation of 50 percent applies to a new, $100,000 piece of equipment purchased by Bellemans Chocolatier, Inc. The asset has a $10,000 estimated final salvage value. If this asset is fully depreciated for tax purposes over its useful life, the overall amount that Bellemans will have depreciated for tax purposes is .

A.) $90,000

B.) $100,000

C.) $135,000

D.) $150,000








Answer: B

How are funds allocated efficiently in a market economy?

How are funds allocated efficiently in a market economy?

A.) The most powerful economic unit receives the funds.

B.) The economic unit that is willing to pay the highest expected return receives the funds.

C.) the economic unit that considers itself most in need of funds receives them.

D.) Receipt of the funds is rotated so that each economic unit can receive them in turn.

Answer: B

Which of the following is NOT an example of a financial intermediary?

Which of the following is NOT an example of a financial intermediary?

A.) International Business Machines, Inc. (IBM).

B.) Vanguard Mutual Fund.

C.) El Dorado Savings and Loan Association.

D.) Bank of America.

Answer: A

The purpose of financial markets is to:

The purpose of financial markets is to:

A.) increase the price of common stocks.

B.) lower the yield on bonds.

C.) allocate savings efficiently.

D.) control inflation.

Answer: C

Money market mutual funds

Money market mutual funds

A.) enable individuals and small businesses to invest indirectly in money-market instruments.

B.) are available only to high net-worth individuals.

C.) are involved in acquiring and placing mortgages.

D.) are also known as finance companies.

Answer: A

A major advantage of the corporate form of organization is:

A major advantage of the corporate form of organization is:

A.) reduction of double taxation.

B.) limited owner liability.

C.) legal restrictions.

D.) ease of organization.






Answer: B

A 30-year bond issued by Gary's Plaid Pants Warehouse, Inc., in 1997 would now trade in the

A 30-year bond issued by Gary's Plaid Pants Warehouse, Inc., in 1997 would now trade in the

A.) primary money market.

B.) secondary money market.

C.) primary capital market.

D.) secondary capital market.







Answer: D

A corporation in which you are a shareholder has just gone bankrupt. Its liabilities are far in excess of its assets. You will be called on to pay:

A corporation in which you are a shareholder has just gone bankrupt. Its liabilities are far in excess of its assets. You will be called on to pay:

A.) a proportionate share of bondholder claims based on the number of common shares that you own.

B.) a proportional share of all creditor claims based on the number of common shares that you own.

C.) an amount that could, at most, equal what you originally paid for the shares of common stock in the corporation.

D.) nothing.

Answer: D

The Counting House, Inc., purchased 5-year property class equipment for $60,000. It uses the MACRS method of depreciation. What is tax depreciation for the second year of the asset's life?

The Counting House, Inc., purchased 5-year property class equipment for $60,000. It uses the MACRS method of depreciation. What is tax depreciation for the second year of the asset's life?

A.) $12,000

B.) $19,200

C.) $20,000

D.) $24,000







Answer: B

Michael Cohn is a "member" (a type of owner) of a marine supply business. Michael's business is

Michael Cohn is a "member" (a type of owner) of a marine supply business. Michael's business is

A.) a sole proprietorship.

B.) a corporation.

C.) a limited liability company.

D.) a general partnership.







Answer: C

Which of the following enjoys limited liability?

Which of the following enjoys limited liability?

A.) A general partnership.

B.) A corporation.

C.) A sole proprietorship.

D.) None of the above.

Answer: B