Suppose Edison 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 NanoSpeck, a biotechnology firm, is selling bonds to raise money for a new lab—a practice known as ___ (debt/equity) finance. Buying a bond issued by NanoSpeck would give Edison _ (a claim to partial ownership in/ an IOU, or promise to pay, from) the firm. In the event that NanoSpeck runs into financial difficulty, (Edison and the other bondholders/ the stockholders) will be paid first. Suppose instead Edison decides to buy 100 shares of NanoSpeck stock. Which of the following statements are correct? Check all that apply. a)The price of his shares will rise if NanoSpeck issues additional shares of stock. b)The Dow Jones Industrial Average is an example of a stock exchange where he can purchase NanoSpeck stock. c)An increase in the perceived profitability of NanoSpeck will likely cause the value of Edison's shares to rise. Alternatively, Edison 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/ lower) interest rate than a corporate bond issued by an electronics manufacturer.

Essentials of Economics (MindTap Course List)

8th Edition

ISBN:9781337091992

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter18: Savings,investment And The Financial System

Section: Chapter Questions

Problem 6PA

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1. Financial institutions in the U.S. economy

Suppose Edison 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 NanoSpeck, a biotechnology firm, is selling bonds to raise money for a new lab—a practice known as _______ (debt/equity) finance. Buying a bond issued by NanoSpeck would give Edison _______ (a claim to partial ownership in/ an IOU, or promise to pay, from) the firm. In the event that NanoSpeck runs into financial difficulty, ______ (Edison and the other bondholders/ the stockholders) will be paid first.

Suppose instead Edison decides to buy 100 shares of NanoSpeck stock.

Which of the following statements are correct? Check all that apply.

a)The price of his shares will rise if NanoSpeck issues additional shares of stock.

b)The Dow Jones Industrial Average is an example of a stock exchange where he can purchase NanoSpeck stock.

c)An increase in the perceived profitability of NanoSpeck will likely cause the value of Edison's shares to rise.

Alternatively, Edison 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/ lower) interest rate than a corporate bond issued by an electronics manufacturer.

Note:- Everything written in bold handwriting is the option for the question. So please give all the correct answers to this problem.

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