1. Financial institutions in the U.S. economy Suppose Hubert would like to use $10,000 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 finance. Buying a bond issued by TouchTech would give Hubert the firm. In the event that TouchTech runs into financial difficulty, will be paid first. Suppose instead Hubert decides to buy 100 shares of TouchTech stock.
Which of the following statements are correct? Check all that apply.
A. The price of his shares will rise if TouchTech issues additional shares of stock.
B. Expectations of a recession that will reduce economywide corporate profits will likely cause the value of Hubert's shares to decline.
C. TouchTech earns revenue when Hubert purchases 100 shares, even if he purchases them from an existing shareholder.
D. Alternatively, Hubert could make a financial investment by purchasing bonds issued by the government of Japan.
E. Assuming that everything else is equal, a bond issued by the government of Japan most likely pays a interest rate than a bond issued by a government that is engaged in a civil war.