If you consider bondholders to be the owners of a firm, then those bondholders: Group of...

If you consider bondholders to be the owners of a firm, then those bondholders:

Group of answer choices

own a put option on the firm with an exercise price equal to the firm’s total debt.

own a call option on the firm with an exercise price equal to the firm’s total equity.

have written a put option on the firm with an exercise price equal to the firm’s total equity.

have written a call option on the firm with an exercise price equal to the firm’s total debt.

own a put option on the firm with an exercise price equal to the firm’s total assets.

Solutions

Expert Solution

option D:

have written a call option on the firm with an exercise price equal to the firm's total debt.

---- unless the firms total debt is not increasing, the bondholders will benefit from the firm and if firms debt increases, it will cause losses for bondholders just like a call option on the sell side.

jeff jeffy answered 2 years ago

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