Homework (Ch 26) 1. Financial institutions in the U.S. economy Suppose Kenji would like to use $2,000 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 Touch Tech, a hand-held computing firm, is selling bonds to raise money for a new lab-a practice known as debt finance. Buying a bond issued by TouchTech would give Kenji an IOU, or promise to pay, from ▼ the firm. In the event that TouchTech runs into financial difficulty, Kenji and the other bondholders v will be paid first. Suppose instead Kenji decides to buy 100 shares of Touch Tech stock. Which of the following statements are correct? Check all that apply. V Expectations of a recession that will reduce economywide corporate profits will likely cause the value of Kenji's shares to decline. O The price of his shares will rise if Touch Tech issues additional shares of stock. O The Dow Jones Industrial Average is an example of a stock exchange where he can purchase TouchTech stock. Alternatively, Kenji could make a financial investment by purchasing bonds issued by the U.S. government. Assuming that everything else is equal, a municipal bond issued by a state most likely pays a higher interest rate than a corporate bond issued by an electronics manufacturer.
Homework (Ch 26) 1. Financial institutions in the U.S. economy Suppose Kenji would like to use $2,000 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 Touch Tech, a hand-held computing firm, is selling bonds to raise money for a new lab-a practice known as debt finance. Buying a bond issued by TouchTech would give Kenji an IOU, or promise to pay, from ▼ the firm. In the event that TouchTech runs into financial difficulty, Kenji and the other bondholders v will be paid first. Suppose instead Kenji decides to buy 100 shares of Touch Tech stock. Which of the following statements are correct? Check all that apply. V Expectations of a recession that will reduce economywide corporate profits will likely cause the value of Kenji's shares to decline. O The price of his shares will rise if Touch Tech issues additional shares of stock. O The Dow Jones Industrial Average is an example of a stock exchange where he can purchase TouchTech stock. Alternatively, Kenji could make a financial investment by purchasing bonds issued by the U.S. government. Assuming that everything else is equal, a municipal bond issued by a state most likely pays a higher interest rate than a corporate bond issued by an electronics manufacturer.
Microeconomics: Principles & Policy
14th Edition
ISBN:9781337794992
Author:William J. Baumol, Alan S. Blinder, John L. Solow
Publisher:William J. Baumol, Alan S. Blinder, John L. Solow
Chapter9: The Financial Markets And The Economy: The Tail That Wags The Dog
Section: Chapter Questions
Problem 5TY
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Transcribed Image Text:Homework (Ch 26)
1. Financial institutions in the U.S. economy
Suppose Kenji would like to use $2,000 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 debt
v finance. Buying a
bond issued by Touch Tech would give Kenji an IOU, or promise to pay, from v the firm. In the event that Touch Tech runs into financial difficulty,
Kenji and the other bondholders ▼ will be paid first.
Suppose instead Kenji decides to buy 100 shares of Touch Tech stock.
Which of the following statements are correct? Check all that apply.
V Expectations of a recession that will reduce economywide corporate profits will likely cause the value of Kenji's shares to decline.
O The price of his shares will rise if Touch Tech issues additional shares of stock.
O The Dow Jones Industrial Average is an example of a stock exchange where he can purchase TouchTech stock.
Alternatively, Kenji could make a financial investment by purchasing bonds issued by the U.S. government.
Assuming that everything else is equal, a municipal bond issued by a state most likely pays a higher v
interest rate than a corporate bond issued
by an electronics manufacturer.
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