When a Promoter Enters into a Contract on Behalf of a Corporation

question 60

Multiple Choice

When a promoter enters into a contract on behalf of a corporation that is not yet formed,the corporation will become liable on the contract:

• A) at the time the promoter enters into the contract.
• B) when the corporation comes into existence.
• C) once the corporation has elected its initial board of directors.
• D) only if the corporation, once formed, agrees to be liable on the contract.
• E) only in the case of a novation.

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Definitions:

Covariance

A measure of the degree to which returns on two risky assets move in tandem. A positive covariance means that asset returns move together. A negative covariance means they vary inversely.

Variance

A measure of the dispersion of a random variable. Equals the expected value of the squared deviation from the mean.

Fairly-Priced Securities

Securities that are believed to be priced appropriately according to their risk level and the expected rate of return.

Positive Betas

A term referring to financial securities that have a beta greater than zero, indicating that their returns generally move in the same direction as the market.