ECON 2560 Study Guide - Midterm Guide: Limited Liability Partnership, Sole Proprietorship, Capital Budgeting

383 views11 pages

peachwasp396

27 Sep 2017

School

Department

Course

Professor

For unlimited access to Study Guides, a Grade+ subscription is required.

Document Summary

You observe that a plasma tv can be purchased for nothing down and ,000 due in one year. The store next door offers an identical television for ,650, but does not offer credit terms. The market"s consensus forecast is that one- year treasury bills will offer 5% next year. Winter 2016: a stock is expected to pay a dividend of per share next year. The rate of return earned on reinvested funds is 15 percent, the company reinvests 40 percent of earnings in the firm, and investors require a 14 percent return on their investments. Stock a has an expected return of 20% and a standard deviation of 26%. Stock b has an expected return of 7% and a standard deviation of. The proportion of your wealth invested in stock a is 35%. The correlation between the two stocks is 0. 75. What is the standard deviation of the portfolio: 10. 84, 16. 28, 18. 30, 21. 97, 23. 40%

Related Questions

2.1 Adam Smith is often called the father of economics. His famous book, The Wealth of Nations, talks about an invisible hand which automatically allocates goods to the persons most able to put them to good use. The invisible hand operates through the price mechanism for goods and services, so that individuals who trade on the market, while seeking only their own good, are actually efficiently allocating society's resources.

His ideas, if applied to modern capital markets, imply that these markets would efficiently allocate investment capital to the firms that would use the capital most efficiently in producing goods and services for society. But this would happen only if markets were left to operate without state intervention.

Do you think modern governments should leave capital markets unregulated? Why or why not?

2.2 Consider a business firm, organized as a proprietorship, which has $100,000 invested in assets a bank loan of $80,000 and $20,000 personal capital invested by the proprietor. If the firm becomes insolvent, who is at risk? Why?

2.3 In the following situation, moral hazard or adverse selection may be present. Indicate which you think is present, if any, and explain your choice.

a. An investor is asking for a bank loan to support a new business she wants to operate. She is unwilling to submit to a credit check.

amethystoyster422

Question 1: Answer the following MC questions...

a).

Samuel F.B. Morse patented the (5 points)

A.	telegraph
B.	automobile
C.	audio recorder
D.	radio transmitter

b).

Your friend wants to open a clothing shop. A necessary capital resource is a (5 points)

	A. place to open the shop
	B. knowledgeable fashion manager
	C. license to conduct business
	D.highway billboard for advertising

c).

Jessica is a violinist who believes she can extend her method of learning music to early childhood education. She opens a preschool in her hometown, using her expertise to form an arts-based program. What factor of production is this? (5 points)

	A. Capital
	B. Entrepreneurship
	C. Labor
	D. Land

d).

Your friend hopes to expand her business to multiple locations. It would be best for her to create a (5 points)

	A. limited liability company
	B. sole proprietorship
	C. corporation
	D. partnership

e).

Root and Vine is a gardening collective and local delivery service started by two friends. Their clientele has grown, and they want to expand. The owners like the idea of protecting their personal property, but they want to maintain control of the business. Which type of organization might best suit their growth? (5 points)

	A. Sole proprietorship
	B. Partnership
	C. Limited liability company
	D. Corporation

f).

An oligopoly is a market for a good or service that (5 points)

	A. has few competitive firms
	B. is perfectly competitive
	C. has one buyer
	D. has one seller

g).

The greatest goal in advertising is to convince us (5 points)

	A. "wants" are unnecessary
	B. the firm has the best price
	C. a particular product is a "need"
	D. the product is the same as other firm's products

h).

"Don't be like John, who had no health insurance when he needed emergency surgery. We make health insurance easy and affordable." This advertisement targets your (5 points)

	A. fears
	B. rituals
	C. emotions
	D. social values

i).

Why do monopolies and oligarchies benefit producers over consumers? (5 points)

	A. Companies control price through demand.
	B. Competition is driven by factors other than price.
	C. Demand influences production more when competition is less.
	D. Few producers can generally control prices.

1. In the kinked demand curve model:

A. Competitors follow any price change by a rival firm.

B. Competitors ignore any price change by a rival firm.

C. Competitors match any price increase and ignore any price decrease by a rival firm.

D. Competitors ignore any price increase and match any price decrease by a rival firm.

2. Force is competing with three other firms for a military contract to remove land mines. Which of the following would not be a part of their competition strategy?

A. one-off decision

B. zero-sum game

C. discrete strategy

D. dynamic game

3. The discoverers of imperfect markets focused on what economic process to criticize the competitive model?

A. comparative advantage

B.opportunity cost

C. maximizing profit

D. economies of scale

4. Firms that operate in an oligopoly market structure would have an incentive to:

	a.increase sales volume with price reductions.
	b.increase profit margins with price increases.
	c.engage in explicit or implicit collusion.
	d.expand market share with price ceilings.

limeplatypus27

ECON 2560 Study Guide - Midterm Guide: Limited Liability Partnership, Sole Proprietorship, Capital Budgeting

Document Summary

Get access

Related Documents

ECON 2560 Study Guide - Midterm Guide: Credit Risk, High-Yield Debt, Net Impact

ECON 2560 Chapter 1-25: Solution Manual to Fundamental of Corporate Finance (4th Edition) by Brealy & Meyers

ECON 2560 Chapter Notes - Chapter 15: Venture Capital, Underwriting, Discounted Cash Flow

Related Questions