Eco 550 Quiz 1 (2013) Essay examples

691 Words Apr 3rd, 2013 3 Pages
Question 1 3 out of 3 points To reduce Agency Problems, executive compensation should be designed to:
Correct Answer: create incentives so that managers act like owners of the firm. Question 2 3 out of 3 points In the shareholder wealth maximization model, the value of a firm's stock is equal to the present value of all expected future ____ discounted at the stockholders' required rate of return.
Correct Answer: profits (cash flows) Question 3 3 out of 3 points The primary objective of a for-profit firm is to ___________.
Correct Answer: maximize shareholder value Question 4 0 out of 3 points The Saturn Corporation (once a division of GM) was permanently closed in 2009. What went wrong with
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Correct Answer: Decrease the required rate of return (ke). Question 10 3 out of 3 points Economic profit is defined as the difference between revenue and ____.
Correct Answer: total economic cost Question 11 0 out of 3 points The approximate probability of a value occurring that is greater than one standard deviation from the mean is approximately (assuming a normal distribution)
Correct Answer: 15.87% Question 12 3 out of 3 points The ____ is the ratio of ____ to the ____.
Correct Answer: coefficient of variation; standard deviation; expected value Question 13 3 out of 3 points The closest example of a risk-free security is
Correct Answer: U.S. Government Treasury bills Question 14 0 out of 3 points Generally, investors expect that projects with high expected net present values also will be projects with
Correct Answer: high risk Question 15 3 out of 3 points A change in the level of an economic activity is desirable and should be undertaken as long as the marginal benefits exceed the ____.
Correct Answer: marginal costs Question 16 3 out of 3 points The primary difference(s) between the standard deviation and the coefficient of variation as measures of risk are:
Correct Answer: the coefficient of variation is a measure of relative risk whereas the standard deviation is a measure of absolute risk Question 17 3 out of 3 points The…

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