high school and start saving money early in life.

Self-Check Questions

1. Answer these three questions about early-stage corporate finance:

a. Why do very small companies tend to raise money from private investors instead of through an IPO?

b. Why do small, young companies often prefer an IPO to borrowing from a bank or issuing bonds?

c. Who has better information about whether a small firm is likely to earn profits, a venture capitalist or

a potential bondholder, and why?

2. From a firm’s point of view, how is a bond similar to a bank loan? How are they different?

3. Calculate the equity each of these people has in their home:

a. Eva just bought a house for $200,000 by putting 10% as a down payment and borrowing the rest from

the bank.

b. Freda bought a house for $150,000 in cash, but if she were to sell it now, it would sell for $250,000.

c. Ben bought a house for $100,000. He put 20% down and borrowed the rest from the bank. However,
{"file_hash": "830b81f41611ac67a490444dbb5d6aed292224606965b06965b914443c93331a", "moddate": "2022-12-07T14:23:05-06:00", "creator": "PDFMiner", "title": "Principles of Microeconomics 3e", "file_name": "Microeconomics3e.pdf", "creationdate": "2022-12-07T14:15:44-06:00", "batch_upload": true, "file_type": ".pdf", "upload_timestamp": "2026-02-07T15:37:44.339247", "producer": "Prince 14.2 (www.princexml.com)", "file_size_mb": 26.99, "total_pages": 597, "source_file": "downloads\\business\\economics\\Microeconomics3e.pdf", "uploaded_via": "batch_uploader", "source": "downloads\\business\\economics\\Microeconomics3e.pdf"}