Suppose Yakov would like to use $8,000 of his savings to make a financial investment. One way of making a financial investment is to purchase stock or bonds from a private company. Suppose TouchTech, a hand-held computing firm, is selling bonds to raise money for a new lab—a practice known as ___(equity/debt) finance. Buying a bond issued by TouchTech would give Yakov_(a claim to partial ownership in/an IOU, or promise to pay, from) the firm. In the event that TouchTech runs into financial difficulty, (Yakov and the other bondholders/the stockholders) will be paid first. Suppose instead Yakov decides to buy 100 shares of TouchTech stock. Which of the following statements are correct? Check all that apply. A. An increase in the perceived profitability of TouchTech will likely cause the value of Yakov's shares to rise. B. The Dow Jones Industrial Average is an example of a stock exchange where he can purchase TouchTech stock. C. Expectations of a recession that will reduce economywide corporate profits will likely cause the value of Yakov's shares to decline. Alternatively, Yakov could make a financial investment by purchasing bonds issued by the government of Japan. Assuming that everything else is equal, a bond issued by the government of Japan most likely pays a (higher/lower) interest rate than a bond issued by a government that is engaged in a civil war.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Suppose Yakov would like to use $8,000 of his savings to make a financial investment.

One way of making a financial investment is to purchase stock or bonds from a private company.

Suppose TouchTech, a hand-held computing firm, is selling bonds to raise money for a new lab—a practice known as _______(equity/debt) finance. Buying a bond issued by TouchTech would give Yakov_______(a claim to partial ownership in/an IOU, or promise to pay, from) the firm. In the event that TouchTech runs into financial difficulty, ________(Yakov and the other bondholders/the stockholders) will be paid first.

Suppose instead Yakov decides to buy 100 shares of TouchTech stock.

Which of the following statements are correct? Check all that apply.

A. An increase in the perceived profitability of TouchTech will likely cause the value of Yakov's shares to rise.

B. The Dow Jones Industrial Average is an example of a stock exchange where he can purchase TouchTech stock.

C. Expectations of a recession that will reduce economywide corporate profits will likely cause the value of Yakov's shares to decline.

Alternatively, Yakov could make a financial investment by purchasing bonds issued by the government of Japan.

Assuming that everything else is equal, a bond issued by the government of Japan most likely pays a ______(higher/lower) interest rate than a bond issued by a government that is engaged in a civil war.

Thank you for the help.

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Bonds refer to high-security debt instruments that enable an entity to raise funds and fulfil capital requirements.

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