1) A key finding of the economic analysis of financial structure is that A) The existence of...
Question:
1) A key finding of the economic analysis of financial structure is that
A) The existence of the free-rider problem for traded securities helps to explain why banks play a predominant role in financing the activities of businesses.
B) While free-rider problems limit the extent to which securities markets finance some business activities, nevertheless the majority of funds going to businesses are channeled through securities markets.
C) Given the great extent to which securities markets are regulated, free-rider problems are not of significant economic consequence in these markets.
D) Economists do not have a very good explanation for why securities markets are so heavily regulated.
2) Although restrictive covenants can potentially reduce moral hazard, a problem with restrictive covenants is that
A) Borrowers may find loopholes that make the covenants ineffective.
B) They are inexpensive to monitor and enforce.
C) Too many resources may be devoted to monitoring and enforcing them, as debt holders duplicate others' monitoring and enforcement efforts.
D) They reduce the value of the debt contract.
3) Of the sources of external funds for nonfinancial businesses in the United States, corporate bonds and commercial paper account for approximately ________ of the total.
A) 5%
B) 10%
C) 32%
D) 50%
4) Of the following sources of external finance for American nonfinancial businesses, the least used is
A) Loans from banks.
B) Stocks.
C) Bonds and commercial paper.
D) Loans from other financial intermediaries.
5) The predominant form of household debt is
A) Consumer installment debt.
B) Collateralized debt.
C) Unsecured debt.
D) Unrestricted debt.
Fundamentals of Corporate Finance
ISBN: 978-0077861629
8th edition
Authors: Richard Brealey, Stewart Myers, Alan Marcus