556PART NINETHE REAL ECONOMY IN THE LONG RUNlocal governments pay a lower interest rate than bonds issued by corporations orthe federal government.The Stock MarketAnother way for Intel to raise funds to build a newsemiconductor factory is to sell stock in the company. Stockrepresents ownershipin a firm and is, therefore, a claim to the profits that the firm makes. For example,if Intel sells a total of 1,000,000 shares of stock, then each share represents owner-ship of 1/1,000,000 of the business.The sale of stock to raise money is called equity finance,whereas the sale ofbonds is called debt finance.Although corporations use both equity and debt fi-nance to raise money for new investments, stocks and bonds are very different.The owner of shares of Intel stock is a part owner of Intel; the owner of an Intelbond is a creditor of the corporation. If Intel is very profitable, the stockholders en-joy the benefits of these profits, whereas the bondholders get only the interest ontheir bonds. And if Intel runs into financial difficulty, the bondholders are paid
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