A company has an agreement with a bondholder that prevents it from selling several of its coal-fired power plants. However, recent regulatory changes have made these plants less profitable and the value of the firm is falling. Which of the following is this agreement called? Collateral trustLienIndentureDebenture

Question
Asked Oct 6, 2019
1 views
  • A company has an agreement with a bondholder that prevents it from selling several of its coal-fired power plants. However, recent regulatory changes have made these plants less profitable and the value of the firm is falling. Which of the following is this agreement called?

 

  1. Collateral trust
  2. Lien
  3. Indenture

Debenture

check_circle

Expert Answer

Step 1

Collateral trust: A bond which is protected against financial asset is termed as collateral trust bond. Bond holder will receive interest payments and maturity amount against the loan provided. The financial asset against which the bond is secured can be sell off to pay for the bond.

Step 2

Lien: The legal right which is approved by the owner of the asset either by law or obtained by creditor is known as lien agreement. Under lien agreement, debtor has the obligation to repay the loan amount. Creditor can hold and sell the assets which is the subject of agreement if, debtor fails to fulfill the obligation. The owner does not have the right to sell the asset without taking permission of lien holder or creditor.

Step 3

Indenture: Indenture is a legal contract under which each party is obliged to perform their duty mentioned in the contract. For example, one party has the obligation to maintain the asset an...

Want to see the full answer?

See Solution

Check out a sample Q&A here.

Want to see this answer and more?

Solutions are written by subject experts who are available 24/7. Questions are typically answered within 1 hour.*

See Solution
*Response times may vary by subject and question.
Tagged in

Business

Finance

Investment Management

Related Finance Q&A

Find answers to questions asked by student like you
Show more Q&A
add
question_answer

Q: Why should a real estate listing contract be in writing and what are the essential elements of a lis...

A: Real estate contracts refer to legal aggreement between different parties. It is enforceable by law ...

question_answer

Q: Construct the amortization schedule for a $14,000.00 debt that is to be amortized in 10 equal semian...

A: Calculation of Amortization Schedule:The amortization schedule for 10 equal payments are calculated....

question_answer

Q: Finding the Interest Rate: Concept Connection Example 6-3 (page 237) 18. What interest rates are imp...

A: Interest rate:An interest rate is a percentage on the principal amount at which a lender gives money...

question_answer

Q: If the interest rate per day is 0.014%, then what is the annual rate?

A: Interest rate:An interest rate is a percentage on the principal amount at which a lender gives money...

question_answer

Q: What’s the interest rate of a 7-year, annual $3,900 annuity with a present value of $20,000? (Use a ...

A: Calculate the interest rate as follows:MS-Excel --> Formulas --> Financials --> Rate

question_answer

Q: I posted the question below earlier today, and got an answer that pretty much matched what I had don...

A: While calculating the risk neutral price, we consider the risk neutral probabilities (probability of...

question_answer

Q: UBTECH Robotics is expected to generate the following free cash flows over the next fiveyears. After...

A: Discounted cash flow (DCF) method is a popular valuation technique. It discounts the future cash flo...

question_answer

Q: Question E5-2

A: Calculate the Account Balance after 4 years:The Account Balance after 4 years is $,2420.99.Excel Spr...

question_answer

Q: The Fitness Studio, Inc.’s, 2021 income statement lists the following income and expenses: EBITDA = ...

A: Earnings per share is the part of a firm's earnings that is allocated  per share outstanding of its ...