Why do businesses incorporate, and why do investors buy stocks?
What will be an ideal response?
Businesses seek limited liability to protect the personal assets of the company owners from lawsuits. In addition, corporations, such as Google, can raise millions of dollars in a single day from selling stock shares for the first time. Investors buy stocks because of expectations that the corporation will earn profits in the future. As a stock owner, you may earn dividends (a payment per share of profit from the company) or earn capital gains (you sell the stock for a higher price than you paid for it).
You might also like to view...
Suppose the nominal interest rate on a savings bond is 7 percent a year and the inflation rate is 4.5 percent a year. How much is the real interest rate?
A) 4.5 percent B) 1.56 percent C) 2.5 percent D) 7 percent E) 11.5 percent
According to Milton Friedman, continued inflation is always and everywhere
A) a supply-side phenomenon. B) caused by continued decreases in aggregate supply. C) caused by continued increases in the budget deficit. D) a monetary phenomenon. E) none of the above
If the economy is near full capacity, the effect of a negative aggregate demand shock is to
A. increase the level of aggregate demand. B. cause the price level to fall. C. increase the level of employment. D. increase the firm's cost of producing at every level of output.
Monica grows coconuts and catches fish. Last year she harvested 1500 coconuts and 600 fish. She values one fish as having a worth of three coconuts. She gave Rachel 300 coconuts and 100 fish for helping her to harvest coconuts and catch fish, all of which were consumed by Rachel. In terms of fish, Monica's income would equal
A. 700 fish. B. 900 fish. C. 1100 fish. D. 2700 fish.