The primary operating goal of a publicly-owned firm interested in serving its stockholders should be to...

The primary operating goal of a publicly-owned firm interested in serving its stockholders should be to

	a.	Maximize the stock price on a specific target date.
	b.	Maximize the firm's expected total income.
	c.	Minimize the chances of losses.
	d.	Maximize the firm's expected EPS.
	e.	Maximize the stock price per share over the long run, which is the stock's intrinsic value.

Which of the following statements regarding a 30-year monthly payment amortized mortgage with a nominal interest rate of 8% is CORRECT?

	a.	The amount representing interest in the first payment would be higher if the nominal interest rate were 6% rather than 8%.
	b.	A smaller proportion of the last monthly payment will be interest, and a larger proportion will be principal, than for the first monthly payment.
	c.	The monthly payments will decline over time.
	d.	Exactly 8% of the first monthly payment represents interest.
	e.	The total dollar amount of principal being paid off each month gets smaller as the loan approaches maturity.

Solutions

Expert Solution

First question:

Maximizing shareholder wealth is the primary operating goal of a publicly-owned firm interested in serving its stockholders. This can be achieved by maximizing the stock price per share over the long run, which is the stock's intrinsic value.

Answer is choice (e) given.

Regarding other choices which are not correct:

All other choices are focus on short term gains only.

Second question:

The following statement regarding a 30-year monthly payment amortized mortgage with a nominal interest rate of 8% is CORRECT:

“A smaller proportion of the last monthly payment will be interest, and a larger proportion will be principal, than for the first monthly payment.”

Answer is choice (b).

Regarding other choices which are not correct:

Monthly payments will be constant throughout the currency of the loan. Other choices given are mathematically incorrect.

jeff jeffy answered 1 year ago

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