50 POINTS Explain why the scenario below is not a description of an angel investor.

Situation: Ray has an idea for developing an app and finds individuals who will invest in the app. These individuals sign an agreement that they expect no money or rights in the app.

Explanation:

When you own stock, you own a part of

the company. There are no guarantees of profits,

or even that you will get your original investment

back, but you might make money in two ways.

First, the price of the stock can rise if the

company does well and other investors want to

buy the stock. If a stock’s price rises from $10 to

$12, the $2 increase is called a capital gain or

appreciation. Second, a company sometimes pays

out a part of its profits to stockholders—that’s

called a dividend. If the company doesn’t do

well, or falls out of favor with investors, your

stock can fall in price, and the company can stop

paying dividends, or make them smaller.

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