In most of your financial decisions early in life, you’ll be a buyer, but let’s think about the incentives of people who sell stocks, bonds, bank accounts, and other financial products.
a. Walking in the shopping mall one day, you see a new store: the Dollar Store. Of course, you’ve seen plenty of dollar stores before, but none like this one: The sign in the window says “Dollars for sale: Fifty cents each.” Why will this store be out of business soon?
b. If business owners are self-interested and fairly rational people, will they ever open up this dollar store in the first place? Why or why not?
c. This dollar store is similar to stories people tell about “cheap stocks” that you might hear about on the news. Fill in the blank with any prices that make sense: “If the shares of this company were really worth ________, no one would really sell it for ____________.”