Comm220 chapter 9and 10 PDF

Preview

Summary

chapter 9 and 10 practice...

Description

TUTO – ANTO Saturday : Chapters 9 & 10 NOTES

PROBLEMS

 He takes more risk since he knows he is not responsible.

 C

 Covenants = guidelines about how companies should behave (to protect investors)  In contracts = debt obligations  E

 C

 TIP: always look if it is BEFORE or AFTER a transaction  !! It is not the principal-agent problem because the case is not tight with information.  As it happens after Marco has been hired, he engages in a reckless behaviour.

 C

 Discount Bond: a bond that has 1. Coupon rate < YTM 2. A 0% coupon rate bond  Fixed Payment Loan: pay a fixed amount (principal + interest) every period throughout the life of the loan.  Simple Loan: repay principal + interest at the maturity date.  B

 Consol (bond)/ Perpetuity = cash flows that go to infinity  D

 B

 We have all the information for the first bond. o At par: YTM = coupon rate = 6%  But we do not have the YTM for the second bond. o Coupon rate = 7%  Face value = 1000$  D

 ANSWER :

 ANSWER :...