1The Heckle Firm has a 70

1The Heckle Firm has a 70

1The Heckle Firm has a 70% chance of a $40,000 return.The Ickle Firm has an 80% chance of a $38,000 return.The Jackle Firm is credibly guaranteed to get a $30,000 return.The only other possibility for all firms is failure, a $0 return. Assume that these firms will issue bonds as long as savers want them..3Although in reality we know information is asymmetric, first consider a situation in which it is perfectly symmetric. With symmetric information, bond buyers demand an expected value with a 20% return in order to buy a bond. In other words, they must expect at least $25,000 back plus 20% of $25,000, totaling $30,000.Selectfirms below that will issue bonds under these hypothetical perfectly symmetric information conditions. (You must select all such firms to get points for this question.)

%d bloggers like this: