Chapter 9 BUSI 408 - Chapter9BUSI408 CorporateBorrowings:

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Chapter 9 BUSI 408 16:17 Corporate Borrowings: Two main sources of borrowing for a corporation 1. loan from a financial institution(Private debt) 2. Bonds (Public debt) Smaller firms—raise money from banks because of the high costs associated  with issuing bonds. Larger firms—raise money from banks for short term needs and depend on the  bond market from long-term financing needs Private financial market, loans are typically floating rate loans. The most popular benchmark rate is LIBOR A typical floating rate loan will specify  100 basis points=1% Indenture: legal agreement between borrower and trustee Current yield of bond=interest payment/current price(not the same at yield to  maturity) Conversion: convert bond to share of the company Call provision: right to recall bond in the feature The lower of the bond rating, the higher the risk of default.  Based on the rating, interest rate will be set.
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This note was uploaded on 05/10/2011 for the course BUSI 408 taught by Professor Zeighamkhokher during the Spring '11 term at University of North Carolina School of the Arts.

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Chapter 9 BUSI 408 - Chapter9BUSI408 CorporateBorrowings:

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