Question 1

Which of the following does not mitigate the principal-agent problem in corporate Finance;

a) electing the eco as a chairman of the board directors
b-tying managerial compensation to the firm's long-term stock price
c-The influence of large shareholders
d-the threat of hostile takeovers
e-increasing proportion of the CEO's that comes from salary and deceasing the proportion that comes from stock option

Question 2

Billy bob holds two bonds with equal sized coupons and equal maturities. Bond A is a tresurary bond and bond B is a corporate bond. Which statement is most correct :

A) Bond A has a higher liquidity premium and therefore sells at higher prie
B) Bond A has lower default risk premium and therefore sells at a lower price
C) Bond B has a higher default risk premium and therefore sells at a lower price
D) Bond B has a higher liquidity premium and therefore sells at a higher price
E) Bond A and B have the same maturities and coupons and will therefore sell at the same price