Suppose Sean would like to invest $6,000 of his savings. One way of investing is to purchase stock or bonds from a private company. Suppose TouchTech, a hand-held computing firm, is selling stocks to raise money for a new lab-a practice known as _____ (Debt/Equity) finance. Buying a share of TouchTech stock would give Sean _________ (an IOU or promise to payfrom/a claim to partial ownership in) the firm. In the event that TouchTech runs into financial difficulty, ______ (the bondholders/sean and the other stockholders) will be paid first.
Suppose Sean decides to buy 100 shares of TouchTech stock. Which of the following statements are correct? Check all that apply.
TouchTech earns revenue when Sean purchases 100 shares, even if he purchases them from an existing shareholder.
An increase in the perceived profitability of TouchTech will likely cause the value of Sean's shares to rise.
The Dow Jones Industrial Average is an example of a stock exchange where he can purchase TouchTech stock.
Alternatively, Sean could invest by purchasing bonds issued by the U.S. government. Assuming that everything else is equal, a corporate bond issued by an electronics manufacturer most likely pays a ______ (higher/lower) interest rate than a municipal bond issued by a state.
