The U.S. government agree

The U.S. government agree

The U.S. government agrees to guarantee a bond issue planned by Demurrage Associates (DA). The value of this guarantee:I) equals the value of the guaranteed loan minus the value of the loan without a guarantee;II) is a subsidy to DA’s equity investors;III) is a windfall gain to the buyers of the bonds;IV) equals the value of a put option on the firm’s assets with an exercise price equal to the bond’s promised payments

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