Final answer:
A broker does not require specific authority to manage a bank account on behalf of the principal (Option 3). Shareholders elect a board of directors to select company managers, and banks act as financial intermediaries. The decision between borrowing and issuing stock depends on several factors.
Step-by-step explanation:
The activity for which the broker would not require specific authority from the principal is managing a bank account on behalf of the principal. Brokers often have discretionary authority to manage bank accounts, which can include the authority to buy and sell securities, without needing to get specific instructions for each transaction. However, buying stocks, selling real estate, and negotiating business deals typically require explicit, specific directions from the principal.
Shareholders elect a board of directors to represent their interests, and this board is responsible for choosing and overseeing the company managers. Banks are known as financial intermediaries because they facilitate the flow of funds between savers and borrowers. As for the critical thinking question, deciding between borrowing and issuing stock to raise capital depends on factors such as control over the company, the cost of capital, and the financial condition of the firm.