Identify the ways in which a bondholder's rights differ from those of a stockholder. In what ways do they differ when a firm is bankrupt?
What will be an ideal response?
Bondholders are not owners of the company, meaning that they are not entitled to a share of the firm's profits, nor are they involved in the voting of the firm's managers. Stockholders are the company's owners, so they are entitled to these things. If a firm is bankrupt, then its creditors must be paid first. That is, the stockholders are residual claimants. They collect any remaining assets once the bondholders (and other lenders) are paid. While the stockholders are owners of the firm, their liability is limited in that the bondholders cannot collect losses from the stockholders beyond the value of the company.
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Each of the following took place in the latter half of the 1990s except
A. a declining federal budget deficit. B. a declining unemployment rate. C. the spread of computerization. D. a rising rate of inflation.
Which of the following would cause an upward movement along the supply curve of hamburgers?
a. A fall in the price of substitutes like pizzas b. A fall in market demand for hamburgers c. An increase in the price of beef d. An increase in the market price of hamburgers
(a) In which year did disinflation begin? (b) In which year did deflation begin?
If U.S. prices increase relative to the rest of the world, we would expect imports:
A. to decrease and exports to increase. B. to increase and exports to fall. C. as well as exports to increase. D. as well as exports to decrease.