Fundamentals of Corporate Finance, Student Value Edition
Fundamentals of Corporate Finance, Student Value Edition
3rd Edition
ISBN: 9780133576863
Author: Jonathan Berk, Peter DeMarzo, Jarrad Harford
Publisher: PEARSON
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Chapter 15, Problem 1CC
Summary Introduction

Corporate debt:

A corporate bond can be defined as a debt security that is issued by a firm and sold to the investors. The backing for such type of bond is the ability of the firm to pay, which is the money to be earned from operations it would conduct in the future. Corporate debt may be categorized into private debt and public debt.

Private debt can be defined as the debt negotiated by a firm with a bank or a small group of investors.

Public debt can be defined as the debt traded through a public market.

To determine:

The four types of corporate debt that are typically issued.

Expert Solution & Answer
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Answer to Problem 1CC

The four types of corporate debt that are typically issued are notes, debentures, mortgage bonds, and asset-backed bonds.

Explanation of Solution

The four types of corporate debt that are typically issued are discussed as follows:

  • Notes: These can be defined as a type of unsecured debt, with a maturity period of less than 10 years time period.
  • Debentures: These can be defined as a type of unsecured debt, with a maturity period of less than 10 years time period or longer than 10 years time period.
  • Mortgage bonds: These can be defined as secured debts that are secured against real property.
  • Asset-backed bonds: These can be defined as secured debts that are secured against any property.
Conclusion

Hence, it can be concluded that the four types of corporate debt that are typically issued are notes, debentures, mortgage bonds, and asset-backed bonds.

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