CHAPTER_24 - CHAPTER 24 The Many Different Kinds of Debt...

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1 CHAPTER 24 The Many Different Kinds of Debt Answers to Problem Sets 1. a. High-grade utility bonds b. Industrial holding companies c. Industrial bonds d. Railroads e. Asset-backed security. 3. a. You would like an issue of junior debt. b. You prefer it not to do so (unless it is also -junior debt). The existing property may not be sufficient to pay off your debt. 4. a. First Boston Corporation b. Bank of America National Trust and Savings Association c. $986.14 d. Registered e. 103.0%. 7. a. False. Lenders usually retain some recourse; e.g., they may demand a completion guarantee. b. True, but some new securities (e.g., Eurobonds) survive even when the original motive for issuing them disappears. c. False. The borrower has the option. d. True. But debt issues with weak covenants -suffered in such takeovers. e. True. The costs of renegotiation are less for -private placements. 8. a. 1,000/47 = 21.28 b. 1,000/50 = $20.00
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2 c. 21.28 X 41.50 = $883.12, or 88.31% d. 650/21.28 = $30.55 e. No (not if the investor is free to convert immediately)
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This note was uploaded on 05/09/2011 for the course FNAN 522 taught by Professor Wilson during the Spring '11 term at University of Louisiana at Lafayette.

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CHAPTER_24 - CHAPTER 24 The Many Different Kinds of Debt...

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