Question

1. Financial institutions in the U.S. economy Suppose Larry would like to invest $3,000 of his savings One way of investing is to purchase stock or bonds from a private company. asfinance. Buying a bond issued by Suppose RoboTroid, a robotics firm, is selling bonds to raise money for a new lab-a practice known as RoboTroid would give Larry the firm. In the event that RoboTroid runs into financial difficulty will be paid first. Suppose instead Larry decides to buy 100 shares of RoboTroid stock. Which of the following statements are correct? Check all that apply. RoboTroid earns revenue when Larry purchases 100 shares, even if he purchases them from an existing shareholder. reduce economywide corporate profits will likely cause the value of Larry's shares to decline. The Dow Jones Industrial Average is an example of a stock exchange where he can purchase RoboTroid stock. Aiternatively, Larry could invest by purchasing bonds issued by the U.S. government. that everything else is equal, a U.s. government bond that matures 30 years from now most likely pays a interest rate than a U.S.government bond that matures 10 years from now.

Answer 1

(a) RoboTroid selling bonds to raise money for a new lab-a practice known as Debt Finance.

(b) Buying the bond would give and IOU in the firm.

(c) In the event that RoboTroid runs into financial difficulty, Larry and other bondholders will be paid first.

(d) If Larry decides to buy 100 shares of RoboTroid stock, following statement is correct:

- Expectation of a recession will likely cause the value of Larry's shares to decline.

(e) U.s. government bond that matures 30 years from now most likely pays a higher interest rate than a U.S.government bond that matures 10 years from now (since longer term bonds have higher interest rate risk than shorter term bonds).