1. Financial institutions in the U.S. economy

Suppose Felix would like to use $7,000 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 stocks to raise money for a new laba practice known as equity / debt finance. Buying a share of TouchTech stock would give Felix a claim to partial ownership in / an IOU, or promise to pay,from the firm. In the event that TouchTech runs into financial difficulty,the bondholders/ Felix and the other stockholders will be paid first.

Suppose Felix 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 Felix's shares to decline.

c)TouchTech earns revenue when Felix purchases 100 shares, even if he purchases them from an existing shareholder.

Alternatively, Felix could make a financial investment by purchasing bonds issued by the government of Japan.

Assuming that everything else is equal, a bond issued by a government that is engaged in a civil war most likely pays a higher/ lower interest rate than a bond issued by the government of Japan.