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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Assume a closed economy, perfectly elastic labor supply, and linear technology. Suppose the incremental capital-output ratio (ICOR) is 3, the depreciation rate is 3%, and the gross savings rate is 10%
Use the Harrod-Domar growth equation to determine the rate of growth. What would the gross savings rate have to be to achieve 5% growth? Assuming a perfectly elastic labor supply, state one criticism of this model from an exogenous growth theory viewpoint and another criticism of this model from an endogenous growth theory viewpoint.
The difference between exports and imports of goods is the
A) balance of trade. B) balance of payments. C) balance of accounts. D) balance of paying.