Question

Please answer all parts of problem :)

a) The best way to describe a primary market transaction will be which of the following?

Choose the correct answer:

ABC company sold 5000 of its shares in a new stock issue to a Pension fund directly

Steven sold 1000 shares to his best friend Sally

Susan sold 10,000 shares to her relative

Charles purchased 4000 shares directly from his father

The president of the company sold 3000 of his personal shares to his son

b)

Sarbanes-Oxley Act of 2002 was enacted for which of the following reasons?

Choose the correct answer:

All corporations to issue new stocks in primary market easily

To make the managers personally liable for corporate fraud

To decrease the protections against corporate fraud

To protect the executives of a corporation from being sued by outsiders

To reduce number of corporations filing for bankruptcy

c)

Which of the following methods is best method to reduce agency problem between managers and shareholders?

Choose the correct answer:

compensating managers with performance bonus based on stock market performance

Allowing the employees to use an option to retire early and receive full pension benefits

awarding additional paid holidays to best executives on the basis of number of years of their service

Corporate control is vested with all employees who can collectively fire the top executives

giving a private jet plane to all top executives

d)

You borrowed $3,000 with "Add-on Interest" at 9% with 12 equal monthly payments to payoff the loan. What is the actual interest rate the lender is charging you in this deal.

Choose the correct answer:

9%

13.51%

12.48%

10.15%

16.22%

Answer 1

a)

1.ABC company sold 5000 of its shares in a new stock issue to a Pension fund directly

b)

5.To reduce number of corporations filing for bankruptcy

c)

1.compensating managers with performance bonus based on stock market performance

d)

1. 9%

principal monthly payment = 3000 / 12 = 250

interest monthly = 3000 x 9%/12 = 22.5

monthly payment = 250 +22.5 = 272.5

total payment = 3270

effective interest = total payment - principal = 3270 - 3000 = 270

rate = 270 / 3000 = 9%