Finance 313 Final Question and
answer already passed 2026
Which of the following goals of the firm are synonymous (equivalent) to the maximization of
shareholder wealth?
A) profit maximization
B) risk minimization
C) maximization of the total market value of the firm's common stock
D) none of the above - correct answer ✔C) maximization of the total market value of the firm's
common stock
In which of the following cases will the agency problem between shareholders and managers be the
greatest?
A) 100% of the common stock is owned by the founder of the company who decided to retire and hired
a manager to run his business for him.
B) The Johnson family owns 50% of the common stock of the company. The other 50% is owned by 5
mutual funds.
C) The common stock of the company is owned by many diverse shareholders, with no shareholder
owning more than 1% of the outstanding stock.
D) All top managers in the company own significant amounts of stock and stock options. - correct
answer ✔C) The common stock of the company is owned by many diverse shareholders, with no
shareholder owning more than 1% of the outstanding stock.
Assume that you went to Las Vegas and hit the jackpot for $5 million. Further assume that you were
offered a choice to receive the $5 million today, or receive it in two years. According to one of the
principles of finance, which would you take?
A) the $5 million in two years because you would be afraid of spending it all right away
B) the $5 million in two years because it would be worth more than if you would receive it today
C) You would be indifferent as to when you would receive the $5 million.
, D) the $5 million today because it would be worth more than if you would receive it in two years -
correct answer ✔D) the $5 million today because it would be worth more than if you would receive it
in two years
Which of the following statements best represents the "Agency Problem"?
A) Managers might attempt to benefit themselves in terms of salary and perquisites at the expense of
shareholders.
B) The agency problem results from the separation of management and the ownership of the firm.
C) The agency problem may interfere with the implementation of maximizing shareholder wealth.
D) all of the above - correct answer ✔D) all of the above
General Electric (GE) has been a public company for many years with its common stock traded on the
New York Stock Exchange. If GE decides to sell 500,000 shares of new common stock, the transaction
will be described as
A) an initial public offering.
B) a secondary market transaction because GE common stock has been trading for years.
C) a seasoned equity offering because GE has sold common stock before.
D) a money-market transaction because GE raises new money to fund its business. - correct answer
✔C) a seasoned equity offering because GE has sold common stock before.
The primary risk of mortgage-backed securities is ________.
A) that the prices of have high volatility
B) that the prices of housing will increase
C) that the government will not be able to meet the guarantees on the cash flows
D) that homeowners may not be able to, or choose not to, repay their loans - correct answer ✔D) that
homeowners may not be able to, or choose not to, repay their loans
answer already passed 2026
Which of the following goals of the firm are synonymous (equivalent) to the maximization of
shareholder wealth?
A) profit maximization
B) risk minimization
C) maximization of the total market value of the firm's common stock
D) none of the above - correct answer ✔C) maximization of the total market value of the firm's
common stock
In which of the following cases will the agency problem between shareholders and managers be the
greatest?
A) 100% of the common stock is owned by the founder of the company who decided to retire and hired
a manager to run his business for him.
B) The Johnson family owns 50% of the common stock of the company. The other 50% is owned by 5
mutual funds.
C) The common stock of the company is owned by many diverse shareholders, with no shareholder
owning more than 1% of the outstanding stock.
D) All top managers in the company own significant amounts of stock and stock options. - correct
answer ✔C) The common stock of the company is owned by many diverse shareholders, with no
shareholder owning more than 1% of the outstanding stock.
Assume that you went to Las Vegas and hit the jackpot for $5 million. Further assume that you were
offered a choice to receive the $5 million today, or receive it in two years. According to one of the
principles of finance, which would you take?
A) the $5 million in two years because you would be afraid of spending it all right away
B) the $5 million in two years because it would be worth more than if you would receive it today
C) You would be indifferent as to when you would receive the $5 million.
, D) the $5 million today because it would be worth more than if you would receive it in two years -
correct answer ✔D) the $5 million today because it would be worth more than if you would receive it
in two years
Which of the following statements best represents the "Agency Problem"?
A) Managers might attempt to benefit themselves in terms of salary and perquisites at the expense of
shareholders.
B) The agency problem results from the separation of management and the ownership of the firm.
C) The agency problem may interfere with the implementation of maximizing shareholder wealth.
D) all of the above - correct answer ✔D) all of the above
General Electric (GE) has been a public company for many years with its common stock traded on the
New York Stock Exchange. If GE decides to sell 500,000 shares of new common stock, the transaction
will be described as
A) an initial public offering.
B) a secondary market transaction because GE common stock has been trading for years.
C) a seasoned equity offering because GE has sold common stock before.
D) a money-market transaction because GE raises new money to fund its business. - correct answer
✔C) a seasoned equity offering because GE has sold common stock before.
The primary risk of mortgage-backed securities is ________.
A) that the prices of have high volatility
B) that the prices of housing will increase
C) that the government will not be able to meet the guarantees on the cash flows
D) that homeowners may not be able to, or choose not to, repay their loans - correct answer ✔D) that
homeowners may not be able to, or choose not to, repay their loans
