The expected rate of return from a share of stock consists of:
a. a dividend return
b. capital appreciation (or depreciation)
c. interest
d. a and b only
e. a, b, and c
QUESTION 2Individuals who face greater risks
a. are more likely to purchase insurance
b. are less likely to purchase insurance
c. are neither more nor less likely to purchase insurance
d. are risk neutral
QUESTION 3The principal difference between economic profits for a monopolist and for a competitive firm is that:
a. monopoly profits create major problems of equity whereas competitive profits do not.
b. competitive profits exist only in the short run whereas monopoly profits may exist in the long run as well.
c. monopoly profits represent a transfer out of consumer surplus whereas competitive profits do not.
d. monopoly profits are usually larger than competitive profits.
QUESTION 4The cost of internal equity (retained earnings) is ____ the cost of external equity (new common stock).
a. greater than b. equal to
c. less than
QUESTION 5The reason some insurance customers are more eager to purchase insurance is
a. they are more risk averse
b. they are less risk averse
c. they have a greater risk of making a claim
d. A and C
QUESTION 6A monopoly's economic profits are represented by:
a. (price minus marginal cost) times number of units sold.
b. (price minus average cost) times number of units sold.
c. (marginal revenue minus price) times number of units sold.
d. (marginal cost minus price) times number of units sold.
QUESTION 7In cost of capital calculations, the flotation cost on new debt is usually ignored because the flotation cost percentage for large debt issues is relatively low.
a. true
b. false
QUESTION 8Individuals who are more risk averse
a. buy less insurance
b. buy more insurance
c. are not more or less inclined to buy insurance
d. are philosophically opposed to insurance
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