Question
Which of the following are not examples of a vicious cycle of deleveraging? Explain.
a. Your university decides to sell several commercial buildings in the middle of town in order to upgrade buildings on campus.
b. A company decides to sell its large an valuable art collection because other asset prices on its balance sheet have fallen below a critical level, forcing creditors to call in their loans to the company because of provisions written into the original loan contract.
c. A company decides to issue more stock in orders t voluntarily pay off some of its debt.
d. A shadow bank must sell its holdings of corporate bonds because falling asset prices have led to a default on the terms of its loan with some creditors.
a. Your university decides to sell several commercial buildings in the middle of town in order to upgrade buildings on campus.
b. A company decides to sell its large an valuable art collection because other asset prices on its balance sheet have fallen below a critical level, forcing creditors to call in their loans to the company because of provisions written into the original loan contract.
c. A company decides to issue more stock in orders t voluntarily pay off some of its debt.
d. A shadow bank must sell its holdings of corporate bonds because falling asset prices have led to a default on the terms of its loan with some creditors.
Answers
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