Equity Contracts

question 14

Multiple Choice

Equity contracts

• A)are claims to a share in the profits and assets of a business.
• B)have the advantage over debt contracts of a lower costly state verification.
• C)are used much more frequently to raise capital than are debt contracts.
• D)are not subject to the moral hazard problem.

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Definitions:

Union of Events

The set of outcomes that belong to either one event or another in probability, including those that belong to both events.

Sample Space

The set of all possible outcomes in a statistical experiment.

Conditional Probability

The probability of an event occurring, given that another event has already occurred.

Mutually Exclusive Events

Two or more events that cannot occur at the same time in any given experiment or scenario, implying no overlap in their outcomes.