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Determining the bondholders and stockholders

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Assume a risky firm has both bondholders and stockholders. If the firm obtains a government loan guarantee on its existing debt, who will gain from the guarantee?

  1. Existing bondholders only
  2. Future stockholders only
  3. Existing bondholders and stockholders on an equal basis?
  4. Both existing bondholders and stockholders in proportion to the firms debt equity ratio?
  5. Existing stockholders only?

Reference no: EM131975612

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