Question

1. Financial institutions in the U.S. economy Suppose Yakov would like to use $1,000 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 Robo Troid, a robotics firm, is selling bonds to raise money for a new lab-a practice known as finance. Buying a bond issued by Robo Troid would give Yakov the firm. In the event that RoboTroid runs into financial difficulty, will be paid first. Suppose instead Yakov decides to buy 100 shares of RoboTroid stock. Which of the following statements are correct? Check all that apply. Robo Troid earns revenue when Yakov purchases 100 shares, even if he purchases them from an existing shareholder. An increase in the perceived profitability of Robo Troid will likely cause the value of Yakov's shares to rise. 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 U.S. government. interest rate than a Assuming that everything else is equal, a corporate bond issued by an electronics manufacturer most likely pays a municipal bond issued by a state.

Answer 1

Given that person Y would like to use $1000 of his savings to make financial investment to purchase stocks or bonds from a private company. Suppose a robotic firm is selling bonds to raise money for new lab, this practice can be defined as debt. Buying a bond issued by robotic firm would give person Y an IOU promise to pay in the firm. In the event that Robo Troid runs into financial difficulty, person Y and other bond holders will be paid first. Given that person Y has decided to buy 100 shares of Robo Troid stock, then an increase in the perceived profitability of Robo Troid will likely cause the value of person Y's shares to rise and expectations of a recession that will reduce economy-wide corporate profits will likely cause the value of person Y's shares to decline. Therefore, the correct options are (b) and (c). Assuming that everything else is equal, a corporate bond issued by an electronics manufacturer most likely pays a higher interest rate than a municipal bond issued by a state.