Question

Select the correct answer from each parenthesis option.

What is the source of Mary’s portfolio income?

Mary trades in ________(real estate/antiques/paper assets) that involves buying and selling of stocks and mutual funds. She is a major shareholder and the CEO of a large corporation. She needs capital to expand the company. Mary can raise capital by_________(issuing stocks/bonds/derivatives ). This will assure lenders that Mary’s company will repay the loan.

Answer 1

Ans. Paper Assets since it involves buying and selling of stocks and Mutual funds. For the remaining two options of Real estate and antiques, it will involve purchase/ sale of land/ property/ antiques.

Ans. Issuing stocks will help Mary to get the capital she needs to expand the company and since equity shareholders have residuary claim on the assets of the company, it will ensure Mary's company will repay back the loan on time. Issuing bonds is equivalent to raising more debt and derivatives are issued to hedge risk.