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If normal operating revenues are inadequate to repay the debt, liquidation of collateral may be necessary. Corporate bonds can be either secured or unsecured by collaterals. Secured bond holders have a priority over others in case of bankruptcy. Most corporate bonds are meaning they are not secured by collateral. The suitability or appropriateness of any item or asset for use as collateral would depend in varying degrees on the following factors relating to the asset: Standardization, durability, marketability, and stability of value. Standardization refers to the worth and re-sale ability of asset, pledged as collateral, in the event of default. Durability relates to the ability of the asset to withstand wear and tear during its useful or economic life. The useful or economic life of an asset should be longer than term period of the debt. This is to ensure that the collateral will still be in useful condition and hence saleable even after the maturity of debt. Therefore, it can still be sold in the event that the borrower could not pay at maturity of the loan. Marketability refers to the depth of the market including secondary market for the collateral. Thus, assets that lend themselves to wide applications are better collaterals. Similarly, assets that have wide secondary or tertiary markets also represent better collaterals than those with little or no secondary market at all.
Assume a firm has the following cash flows for the next five years: $50,000, $100,000, $150,000, $200,000, and $300,000. We start this business with an initial investment of $250,0
Role of Custodians The Securities and Exchange Board of India on 5th May, 1996, through its notification No.S.O.344 (E) has issued the SEBI (Custodian of Securities) Regulation
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You've just won a huge $100 million lottery. You've decided to invest your winnings in the following way: $30 million in real estate, $30 million in corporate bonds and $40 mil
1. Suppose a firm's tax rate is 35%. What affect would a $10 million operating expense have on this year's earnings? What effect would it have on next year's earnings? 2. What
Short sales : Short sales of a security means borrowing of an underlying security by an investor from other investors who are holding it (in Demat account) and selling it with
Basics of Convertible Bonds The provision of conversion in a corporate bond entitles the bondholder the right to convert the bond into a predetermined number of shares of commo
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Ho can we estimate that firm is going to benefit from projec To calculate how firm is going to benefit from project we need to calculate whether firm is earning the required ra
Brandon Michael Chu of Henry Law & Yang Yi Capital Limited believes that earnings and dividends at Alua Amanova & Shuwen Wang Technologies (AST) will continue to grow at 12% per ye
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