A Collateral Contract Involves

question 21

Multiple Choice

A collateral contract involves:

• A) three parties and two promises, one of which is conditional.
• B) two parties and two promises, both of which are conditional.
• C) two parties and three promises, one of which is conditional.
• D) three parties and two promises, both of which are conditional.

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Definitions:

Primary Markets

Markets where new securities are issued and sold for the first time to investors, including initial public offerings (IPOs).

Secondary Markets

Markets where investors buy and sell securities or assets that have already been issued or owned, such as the stock market.

Common Stock

An ownership stake in a company, signified by equity securities, granting the holder voting rights on corporate issues and entitlement to dividends.

Agency Problems

Conflicts of interest that arise when agents (managers or executives) make decisions that benefit themselves rather than the principals (shareholders) they are supposed to represent.