Suppose Kevin would like to invest $3,000 of his savings. One way of investing i
ID: 2496291 • Letter: S
Question
Suppose Kevin would like to invest $3,000 of his savings. One way of investing is to purchase stock or bonds from a private company Suppose RoboTroid, a robotics firm, is selling stocks to raise money for a new lab-a practice known as finance. Buying a share stock would give Kevin the firm. In the event that RoboTroid runs into financial difficulty, will be paid firt. Suppose Kevin decides to buy 100 shares of RoboTroid stock. Which of the following statements are correct? Check all that apply. The Dow Jones Industrial Average is an example of a stock exchange where he can purchase RoboTroid stock. The price of his shares will rise If RoboTroid issues additional shares of stock. Expectations of a recession that will reduce economy-wide corporate profits will likely cause the value of Kevin's Shares to decline. Alternatively, Kevin could invest by purchasing bonds issued by the U.S. government Assuming that everything else is equal a U.S, government bond that matures 30 years from now most likely pays a interest rate U.S, government bond that matures 10 years from now.Explanation / Answer
Correct Answer:
Equity Finance or IPO Finance
Explanation:
In this type of financing, firms sell stock to raise finance for their project. If it is done for the first time to the public then it is termed as IPO (Initial Public Offering).
Correct Answer:
Shareholding rights / share holder / voting rights
Explanation:
Buying a share of the company makes buyer a shareholder. An ordinary shareholder will have a voting right in the annual general meeting of the company.
Correct Answer:
Creditors / lenders / bond holders
Explanation:
When the firms run into difficulty, first priority is given to those people who have given debt to the company. Such participants are Creditors / lenders / bond holders
Correct Answer:
Expectations of recession that will reduce economy wide corporate profit that will cause value of Kevin’s share to decline.
Explanation:
Dow Jones Industrial average is an index of top 30 stock. Thus, it is not a stock exchange. Issue of additional number of shares will lead to the dip in overall prices. Later on, it will recover and can increase in future depending upon the performance of the company.
Correct Answer:
Lower Interest Rate
Explanation:
It is difficult to predict economic scenario for a longer term. Thus, to minimize the interest rate risk, lower interest rate is paid to 30 year bond in comparison to the 10 year bond.
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