U1M4

What are Bonds?

• A stipend

• Profit

• debt

• a partial ownership in a company

Your business, Balcony Management, has been doing very well. In fact, you are starting to see some decent profit! You decide it is time to move to a larger office space and purchase some new office furniture and equipment. You go to the bank you have been using for your business transactions and ask for a business loan. The bank provides you with a loan. What do you have to do next for the bank?

• Pay the minimum payment on the loan to the bank each month

• Repay the loan, including interest, over a predetermined amount of time

• Pay the total interest upfront

• Write the bank a thank you note and put a positive review on Yelp

You own a large company and would like to issue bonds for $12 million to pay for the construction of a new manufacturing facility. As a bond issuer, your company will need to ________.

• Pay interest payments annually and repay the entire $12 million at the end of the bond term.

• Find an investor who will yield a higher return for your bond.

• Find someone who would like to pay $12 million for your bond.

• Pay the interest and a portion of the principal balance to the bank each month for the duration of the bond term.

Noah’s company is privately owned. His company:

• does not offer shares of the company to the public.

• can sell stock on the NYSE.

• cannot accept funding from foreign investors.

• can sell stock on Nasdaq.

Susan, Heather, and Ricky own a private company. Their company may be set up as:

• a sole proprietorship

• a joint venture

• a partnership

• a direct investment

Gloria just started working for GlenMack. As part of her signing bonus, she received 20 shares of GlenMack stock. Gloria is excited to contribute to the company and to track the value of her shares on the New York Stock Exchange. GlenMack must be:

• a public company

• a good company to work for

• an LLC

• a private company

Stocks or equity securities are:

• financial instruments that may include share of a company’s future profits.

• Managed by your local commercial bank

• Debt to the company

• Solely used by large corporations

Those who buy stock become ________.

• Liable for the firm’s debt

• Legally responsible for the firm

• Employees of the firm

• Shareholders of the firm

A firm will receive a major financial benefit from the sale of its stock ________ .

• when it offers the stock as an employment benefit

• at the initial public offering

• when the stock is traded on the New York Stock Exchange

• each time a shareholder buys or sells the stock

Historically many methods and markets were used to raise capital, but the primary methods that have evolved in modern times are the:

• commodities markets

• bond markets and stock markets

• land markets and housing markets

• over the counter markets