Purchase Solution

junk bonds and capital structure

Not what you're looking for?

Ask Custom Question

The development of the new issue junk bond market had important implications for capital structure choice. The existence of a viable junk bond market means that firms can comfortably maintain higher degrees of leverage than they could prior to the development of this market. Do you agree or disagree? Justify your answer.

Purchase this Solution
Solution Summary

Describes the implications to a corporation when considering junk bonds as a component of their capital structure

Solution Preview

This is completely false. Junk bonds are called so because of their higher risk of default. For an investor to be willing to take on such ...

Purchase this Solution
Free BrainMass Quizzes
Marketing Research and Forecasting

The following quiz will assess your ability to identify steps in the marketing research process. Understanding this information will provide fundamental knowledge related to marketing research.

Organizational Leadership Quiz

This quiz prepares a person to do well when it comes to studying organizational leadership in their studies.

Lean your Process

This quiz will help you understand the basic concepts of Lean.

Basics of corporate finance

These questions will test you on your knowledge of finance.

Balance Sheet

The Fundamental Classified Balance Sheet. What to know to make it easy.

View More Free Quizzes
Related BrainMass Solutions

  • Junk Bond Market Implications

    These characteristics of junk bonds make it difficult for issuer to raise funds from this type of external financing and therefore, as much as possible issuers try to maintain a debt-to-equity capital structure that would not result to their bonds being

  • New Issue Junk Bond Market and Capital Structure Choice

    279563 New Issue Junk Bond Market and Capital Structure Choice The development of the new issue junk bond market had important implications for capital structure choice.

  • Viable junk bond market means higher leverage is ok?

    The development of the new issue junk bond market had important implications for capital structure choice.

  • Ken Robinson- Write a memo to the president, answering his request

    raising needed capital over equity issuance is the tax benefits from the bonds' interest payment.

  • Market Value of Bonds for Hartnett Company

    253704 Market Value of Bonds for Hartnett Company An insurance company purchased bonds issued by Hartnett Company two years ago. Today, Cookeres Company has begun to issue junk bonds and is using the funds to repurchase most of its existing stock.

  • Bond Rating Services

    (non-investment grade), or "junk bonds" D: Bonds in default for non-payment of principal and/or interest iInvestment bonds are the ones with rate AAA and AA, and AA and BBB.

  • issue bonds to rebuy stocks

    Today, XYZ Company has begun to issue junk bonds and is using the funds to repurchase most of its existing stock. Why might the market value of those bonds held by the insurance company be affected by this action?

  • Interest Rate Fundamentals: Term Structures and Risk Premiums

    Junk bonds have the highest risk premium because they also carry the highest likelihood of default. Mortgage rates are the rate of interest charged by the lender to the borrower.

  • The James Bond Fund

    Finally, the current expected return for investment-grade (I) bonds is 9%, and it is 12% for junk (J) bonds. A.

View More Related Solutions