Describe the two major obligations incurred by a company when bonds are issued.
Magda and Helga are discussing how the market price of a bond is determined. Magda believes that the market price of a bond is solely a function of the amount of the principal payment at the end of the term of a bond. Is she right? Discuss.
A student asks your help in understanding some characteristics of a corporation. Explain each of these.
Corporation allows the issuance of a maximum of 100,000 shares of common stock. During its first 2 years of operation, Clio sold 60,000 shares to shareholders and reacquired 4,000 of these shares. After these transactions, how many shares are authorized, issued, and outstanding?© BrainMass Inc. brainmass.com October 25, 2018, 6:39 am ad1c9bdddf
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The two major obligations incurred by a company when bonds are issued are the interest payments due on a periodic basis and the principal must be paid at maturity. The market price of a bond is determined by using the current interest rate compared to the interest rate of the bond. Companies most often determine the interest rate on their bonds based upon a specific on-the-run U.S. Treasury bond that matches the company's bond maturity. For instance, a 10-year company bond is often priced to the 10-year Treasury bond. In addition, one must know the face value of the bond, which is also known as the par value. So, Magda is incorrect. The bond's principal payment at the end of the term of a bond is ...
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Capital Structure Decision Types
1.Discuss types and sources of corporate debt and bond covenants.
2.Discuss the pros and cons of debt financing. Provide examples.
3.Discuss factors that influence the firm's choice of capital structure. Describe how taxes affect the choice of debt versus equity.
4.Explain what is meant by "indirect costs of financial distress."
5.Discuss how leverage can alter the incentives of managers. Provide examples.