Final answer:
Private investors are suited for very small companies to avoid IPO costs; as companies grow, they may opt for IPOs for more capital and market exposure. Venture capitalists often have better knowledge about a firm's potential profits. Bonds and bank loans both offer capital but differ in tradeability and interest rate stability; Fred's home equity is $20,000.
Step-by-step explanation:
Private investors are often the choice for very small companies looking to raise funds because they are not ready to bear the cost and regulations associated with an Initial Public Offering (IPO). IPOs might be preferred by small, young companies that have grown enough to bear these costs and seek broader market exposure and access to more capital. When it comes to information regarding the profitability of a small firm, a venture capitalist typically has better information due to their involvement in and knowledge of the start-up ecosystem.
Bonds and bank loans both provide financial capital to firms. However, bonds can be traded in financial markets, while bank loans are typically held by the lending institution. Furthermore, bond interest rates might fluctuate with market conditions, unlike bank loans which generally have fixed interest rates.
Fred's equity in his new home is the down payment he made, which is 10% of the purchase price. For a $200,000 house, this amounts to $20,000 in equity.