Chapter 17: Q 9. (page 426)
What are the most common ways for start-up firms
to raise financial capital?
There are various ways for start-up firms to raise financial capital such as borrowing from banks, raising funds from investors, etc.
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You and your friend have opened an account on
E-Trade and have each decided to select five similar companies in which to invest. You are diligent in monitoring your selections, tracking prices, current events, and actions the company has taken. Your friend chooses his companies randomly, pays no attention to the financial news, and spends his leisure time focused on everything besides his investments. Explain what might be the performance for each of your portfolios at
the end of the year.
Investors sometimes fear that a high-risk investment is especially likely to have low returns. Is this fear true? Does a high risk mean the return must be low?
Explain how a company can fail when the
safeguards that should be in place fail.
What is the total amount of interest from a $5,000 loan after three years with a simple interest rate of 6%?
How do bank failures cause the economy to go into
recession?
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