Debt Holders Can Be Thought of as Owning the Firm

question 65

Multiple Choice

Debt holders can be thought of as owning the firm but having ________ a call option on the assets of the firm with a strike price equal to ________.

• A) written, face value of debt
• B) bought, face value of debt
• C) written, value of equity
• D) bought, value of equity

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Definitions:

A Car

A motor vehicle designed primarily for passenger transportation.

A House

A building for human habitation, typically consisting of multiple rooms and other spaces.

Trespasser

An individual who enters someone's property without permission or legal right.

Electric Meter

A device that measures the amount of electrical energy consumed by a residence, business, or an electrically powered device.