Suppose you have a choice between two corporate bonds, both of which will give you a payment of $1000 in one year assuming that the corporation is able to meet its obligations. One is a bond from General Motors, the other is a bond from Cisco Systems.

Question

Suppose you have a choice between two corporate bonds, both of which will give you a payment of $1000 in one year assuming that the corporation is able to meet its obligations. One is a bond from General Motors, the other is a bond from Cisco Systems.

Which of these two bonds would you pay a higher price for? I.e. which of these two corporations should have a lower discount rater?

In recent news, GM has received a junk bond rating. Cisco, I belive, is rated very high. I would pay more for a Cisco bond.

I need some help for my corporate finance course

what is the relevant law relied on by the judge in making his decision

On 11 July 2005 Messrs Brady, Frasca and Paix as lenders made a formal notice of demand for payment to Timentel of an amount of about $247,000. But they gave the company a limited extension of time to repay. Mrs Ehsman's solicitors alleged in correspondence that any attempt to enforce the charge would render it void under s 267 of the Corporations Act, because the chargees were "relevant persons" for the purposes of that section.

19

Answer 1

The relevant law relied on by the judge in this case is Section 267 of the Corporations Act. Section 267 of the Corporations Act deals with the enforcement of charges and provides limitations on the ability of parties to enforce charges against a company. In this specific case, Mrs Ehsman's solicitors alleged that any attempt to enforce the charge by the lenders would render it void under Section 267 because the lenders were considered "relevant persons" as per that section. The judge would then consider the provisions and requirements of Section 267 in order to make a decision on the validity of the charge and whether or not it could be enforced.