The difference between debentures and mortgage bonds.

Question

Want to see more full solutions like this?

Answer 1

Question

Chapter 7, Problem 1RQ

Summary Introduction

To discuss: The difference between debentures and mortgage bonds.

Expert Solution & Answer

Explanation of Solution

The difference between debentures and mortgage bonds are as follows:

A debenture can be termed as any unsecured long-term debt. Because these bonds are unsecured, the earning capacity of the issuing organization is of big worry to the bondholders. They are additionally seen as being extra risky than secured securities and therefore, must furnish the investors with a better return than secured bonds give. Frequently the issuing company tries to give some assurance to the holder through the disallowance of any extra encumbrance of assets.

This disallows the upcoming issuance of secured long-term debt that would additionally connect the company's assets and leave the bondholders fewer secured. In terms of the issuing firm, the main benefit of debentures is that no property must be secured by them. This enables the firm to give debt and still save some future acquiring power.

A mortgage bond is a type of bond that is secured by a lien on real property. Normally, the actual value of the real property is higher than that of the mortgage bonds which are issued. This gives the mortgage bondholders an edge of protection in the occasion the market value of the secured property decreases.

On account of foreclosure, the trustees have the ability to sell the secured property and utilize the returns to pay the bondholders. If the returns from such sale don't cover the bonds, the bondholders become general creditors, like debenture bondholders, for the unpaid segment of the debt.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Students have asked these similar questions

Use the binomial method to determine the value of an American Put option at time t = 0. The option expires at time t = T = 1/2 and has exercise price E = 55. The current value of the underlying is S(0) = 50 with the underlying paying continuous dividends at the rate D = 0.05. The interest rate is r = 0.3. Use a time step of St = 1/6. Consider the case of p = 1/2 and suppose the volatility is σ = 0.3. Perform all calculations using a minimum of 4 decimal places of accuracy. =

Consider a European chooser option with exercise price E₁ and expiry date T₁ where the relevant put and call options, which depend on the value of the same underlying asset S, have the same exercise price E2 and expiry date T₂. Determine, in terms of other elementary options, the value of the chooser option for the special case when T₁ = T2. Clearly define all notation that you use.

The continuous conditional probability density function pc(S, t; S', t') for a risk neutral lognormal random walk is given by Pc(S, t; S', t') = 1 σS'√2π(t' - t) - (log(S/S) (ro²)(t − t)] exp 202 (t't) In the binomial method, the value of the underlying is Sm at time step môt and the value of the underlying at time step (m + 1)St is Sm+1. For this case evaluate Ec[(Sm+1)k|Sm] = [°° (S')*pc(S™, mdt; S', (m + 1)8t)dS' showing all steps, where k is a positive integer with k ≥ 1. You may assume that 1 e (x-n)2 2s2dx = 1 for all real numbers n and s with s > 0.

Answer 2

Question

Chapter 7, Problem 1RQ

Summary Introduction

To discuss: The difference between debentures and mortgage bonds.

Expert Solution & Answer

Explanation of Solution

The difference between debentures and mortgage bonds are as follows:

A debenture can be termed as any unsecured long-term debt. Because these bonds are unsecured, the earning capacity of the issuing organization is of big worry to the bondholders. They are additionally seen as being extra risky than secured securities and therefore, must furnish the investors with a better return than secured bonds give. Frequently the issuing company tries to give some assurance to the holder through the disallowance of any extra encumbrance of assets.

This disallows the upcoming issuance of secured long-term debt that would additionally connect the company's assets and leave the bondholders fewer secured. In terms of the issuing firm, the main benefit of debentures is that no property must be secured by them. This enables the firm to give debt and still save some future acquiring power.

A mortgage bond is a type of bond that is secured by a lien on real property. Normally, the actual value of the real property is higher than that of the mortgage bonds which are issued. This gives the mortgage bondholders an edge of protection in the occasion the market value of the secured property decreases.

On account of foreclosure, the trustees have the ability to sell the secured property and utilize the returns to pay the bondholders. If the returns from such sale don't cover the bonds, the bondholders become general creditors, like debenture bondholders, for the unpaid segment of the debt.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 3

Question

Chapter 7, Problem 1RQ

Summary Introduction

To discuss: The difference between debentures and mortgage bonds.

Expert Solution & Answer

Explanation of Solution

The difference between debentures and mortgage bonds are as follows:

A debenture can be termed as any unsecured long-term debt. Because these bonds are unsecured, the earning capacity of the issuing organization is of big worry to the bondholders. They are additionally seen as being extra risky than secured securities and therefore, must furnish the investors with a better return than secured bonds give. Frequently the issuing company tries to give some assurance to the holder through the disallowance of any extra encumbrance of assets.

This disallows the upcoming issuance of secured long-term debt that would additionally connect the company's assets and leave the bondholders fewer secured. In terms of the issuing firm, the main benefit of debentures is that no property must be secured by them. This enables the firm to give debt and still save some future acquiring power.

A mortgage bond is a type of bond that is secured by a lien on real property. Normally, the actual value of the real property is higher than that of the mortgage bonds which are issued. This gives the mortgage bondholders an edge of protection in the occasion the market value of the secured property decreases.

On account of foreclosure, the trustees have the ability to sell the secured property and utilize the returns to pay the bondholders. If the returns from such sale don't cover the bonds, the bondholders become general creditors, like debenture bondholders, for the unpaid segment of the debt.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 4

Question

Chapter 7, Problem 1RQ

Summary Introduction

To discuss: The difference between debentures and mortgage bonds.

Expert Solution & Answer

Explanation of Solution

The difference between debentures and mortgage bonds are as follows:

A debenture can be termed as any unsecured long-term debt. Because these bonds are unsecured, the earning capacity of the issuing organization is of big worry to the bondholders. They are additionally seen as being extra risky than secured securities and therefore, must furnish the investors with a better return than secured bonds give. Frequently the issuing company tries to give some assurance to the holder through the disallowance of any extra encumbrance of assets.

This disallows the upcoming issuance of secured long-term debt that would additionally connect the company's assets and leave the bondholders fewer secured. In terms of the issuing firm, the main benefit of debentures is that no property must be secured by them. This enables the firm to give debt and still save some future acquiring power.

A mortgage bond is a type of bond that is secured by a lien on real property. Normally, the actual value of the real property is higher than that of the mortgage bonds which are issued. This gives the mortgage bondholders an edge of protection in the occasion the market value of the secured property decreases.

On account of foreclosure, the trustees have the ability to sell the secured property and utilize the returns to pay the bondholders. If the returns from such sale don't cover the bonds, the bondholders become general creditors, like debenture bondholders, for the unpaid segment of the debt.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 5

Chapter 7, Problem 1RQ

Summary Introduction

To discuss: The difference between debentures and mortgage bonds.

Expert Solution & Answer

Explanation of Solution

The difference between debentures and mortgage bonds are as follows:

A debenture can be termed as any unsecured long-term debt. Because these bonds are unsecured, the earning capacity of the issuing organization is of big worry to the bondholders. They are additionally seen as being extra risky than secured securities and therefore, must furnish the investors with a better return than secured bonds give. Frequently the issuing company tries to give some assurance to the holder through the disallowance of any extra encumbrance of assets.

This disallows the upcoming issuance of secured long-term debt that would additionally connect the company's assets and leave the bondholders fewer secured. In terms of the issuing firm, the main benefit of debentures is that no property must be secured by them. This enables the firm to give debt and still save some future acquiring power.

A mortgage bond is a type of bond that is secured by a lien on real property. Normally, the actual value of the real property is higher than that of the mortgage bonds which are issued. This gives the mortgage bondholders an edge of protection in the occasion the market value of the secured property decreases.

On account of foreclosure, the trustees have the ability to sell the secured property and utilize the returns to pay the bondholders. If the returns from such sale don't cover the bonds, the bondholders become general creditors, like debenture bondholders, for the unpaid segment of the debt.

Answer 6

Chapter 7, Problem 1RQ

Summary Introduction

To discuss: The difference between debentures and mortgage bonds.

Expert Solution & Answer

Explanation of Solution

The difference between debentures and mortgage bonds are as follows:

A debenture can be termed as any unsecured long-term debt. Because these bonds are unsecured, the earning capacity of the issuing organization is of big worry to the bondholders. They are additionally seen as being extra risky than secured securities and therefore, must furnish the investors with a better return than secured bonds give. Frequently the issuing company tries to give some assurance to the holder through the disallowance of any extra encumbrance of assets.

This disallows the upcoming issuance of secured long-term debt that would additionally connect the company's assets and leave the bondholders fewer secured. In terms of the issuing firm, the main benefit of debentures is that no property must be secured by them. This enables the firm to give debt and still save some future acquiring power.

A mortgage bond is a type of bond that is secured by a lien on real property. Normally, the actual value of the real property is higher than that of the mortgage bonds which are issued. This gives the mortgage bondholders an edge of protection in the occasion the market value of the secured property decreases.

On account of foreclosure, the trustees have the ability to sell the secured property and utilize the returns to pay the bondholders. If the returns from such sale don't cover the bonds, the bondholders become general creditors, like debenture bondholders, for the unpaid segment of the debt.

Answer 7

Chapter 7, Problem 1RQ

Summary Introduction

To discuss: The difference between debentures and mortgage bonds.

Answer 8

Expert Solution & Answer

Explanation of Solution

The difference between debentures and mortgage bonds are as follows:

A debenture can be termed as any unsecured long-term debt. Because these bonds are unsecured, the earning capacity of the issuing organization is of big worry to the bondholders. They are additionally seen as being extra risky than secured securities and therefore, must furnish the investors with a better return than secured bonds give. Frequently the issuing company tries to give some assurance to the holder through the disallowance of any extra encumbrance of assets.

This disallows the upcoming issuance of secured long-term debt that would additionally connect the company's assets and leave the bondholders fewer secured. In terms of the issuing firm, the main benefit of debentures is that no property must be secured by them. This enables the firm to give debt and still save some future acquiring power.

A mortgage bond is a type of bond that is secured by a lien on real property. Normally, the actual value of the real property is higher than that of the mortgage bonds which are issued. This gives the mortgage bondholders an edge of protection in the occasion the market value of the secured property decreases.

On account of foreclosure, the trustees have the ability to sell the secured property and utilize the returns to pay the bondholders. If the returns from such sale don't cover the bonds, the bondholders become general creditors, like debenture bondholders, for the unpaid segment of the debt.

Answer 9

Expert Solution & Answer

Answer 10

Expert Solution & Answer

Answer 11

Ch. 7 - Prob. 1RQ Ch. 7 - Prob. 2RQ Ch. 7 - Prob. 3RQ Ch. 7 - a. How does a bonds par value differ from its...Ch. 7 - Prob. 5RQ Ch. 7 - Prob. 6RQ Ch. 7 - Prob. 7RQ Ch. 7 - Prob. 8RQ Ch. 7 - Prob. 9RQ Ch. 7 - Define the expected rate of return to bondholders.

The difference between debentures and mortgage bonds.

To discuss: The difference between debentures and mortgage bonds.

Explanation of Solution

Want to see more full solutions like this?

Chapter 7 Solutions