Essentials of Corporate Finance
Essentials of Corporate Finance
8th Edition
ISBN: 9780078034756
Author: Stephen A. Ross, Randolph W. Westerfield, Bradford D. Jordan
Publisher: MCGRAW-HILL HIGHER EDUCATION
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Chapter 13, Problem 13.5C
Summary Introduction

To discuss: The cost of indirect bankruptcy.

Introduction:

The legal proceeding, which involves a business or person that is unable to pay back the outstanding debts is called a bankruptcy. There are two costs of bankruptcy. They are direct cost of bankruptcy and indirect cost of bankruptcy.

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A. In 2008, during the global financial crisis, Lehman Brothers, one of the largest investment banks, collapsed and defaulted on its corporate bonds, causing significant losses for bondholders. This event highlighted several risks that investors in corporate bonds might face. What are the key risks an investor would encounter when investing in corporate bonds? Explain these risks with examples or academic references. [15 Marks]

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Essentials of Corporate Finance

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How Bankruptcy Works; Author: Two Cents;https://www.youtube.com/watch?v=tpI0XWjIsqI;License: Standard Youtube License