If you believe that a firm will grow rapidly in the future, you should buy its
A. Common stock
B. Notes
C. Preferred Stock
D. Bonds
Thanks
If you believe that a firm will grow rapidly in the future, you should consider buying its common stock, which is option A. Common stock represents ownership in a company and provides potential growth and capital appreciation. By buying common stock, you become a shareholder in the company and have the opportunity to benefit from the firm's future growth and any increase in the stock's value.
To arrive at this answer, it's important to understand the characteristics of the different investment options mentioned. Bonds and notes (option B and D) are debt securities issued by companies or governments to raise capital. When you buy a bond or note, you are essentially lending money to the issuer and, in return, receive periodic interest payments (coupons) and the return of your principal at maturity. These investments provide a fixed income and are typically considered to be more conservative and less volatile than stocks.
Preferred stock (option C) is a hybrid security that has characteristics of both common stock and bonds. Preferred stockholders receive a fixed dividend payment, but they have lower priority than bondholders in case of liquidation. Preferred stock generally offers less potential for growth compared to common stock.
Therefore, based on the question's context of expecting rapid future growth, common stock (option A) is the most appropriate choice, as it offers the potential for capital appreciation and benefits directly from the success and growth of the firm.