Midterm Study Guide
Fin 5170
Fall 2009

The exam will consist on multiple choices, and problems and may be an essay question. I will ask a maximum of two questions taken from the following material covered in class:

Chapter 1 • Describe the concept of agency problems and different ways to ameliorate agency problems in a corporation

Chapter 3 • Example 3.7 (pages 65-66) • Use the concept of arbitrage to explain the price of Security A in table 3.8, and Security B in table 3.9). Compute the risk premium of both securities. • Example 3.10 in page 72 • Example 3.11 in page 74 • Problems 14, 17, 18 (pages 78-80)

You will also have the opportunity to answer several questions from the next pages:

Chapter 1 - The Corporation

1.1 The Four Types of Firms

2)
Which of the following organization forms for a business does not avoid double taxation? A)
Limited Partnership B)
"C" Corporation C)
"S" Corporation D)
Limited Liability Company Answer:
B

3)
Which of the following organization forms has the most revenue? A)
"S" Corporation B)
Limited Partnership C)
"C" Corporation D)
Limited Liability Company Answer:
C

4)
Which of the following organization forms accounts for the greatest number of firms? A)
"S" Corporation B)
Limited Partnership C)
Sole Proprietorship D)
"C" Corporation Answer:
C

5)
Which of the following is NOT an advantage of a sole proprietorship? A)
Single taxation B)
Ease of setup C)
Limited liability D)
No separation of ownership and control Answer:
C

6)
Which of the following statements regarding limited partnerships is true? A)
There is no limit on a limited