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Capital market imperfections view

Definition:

The view that issuing debt is generally valuable, but that the firm's optimal choice of capital structure involves various other views of capital structure ( net corporate/personal tax, agency cost, bankruptcy cost, and pecking order), that result from considerations of asymmetric information, asymmetric taxes, and transaction costs.

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Copyright © 2011 Campbell R. Harvey, Professor of Finance, Fuqua School of Business at Duke University

Term of the Day

Targeted Amortization Class (TAC) bonds

Bonds offered as a tranche class of some CMOs, according to a sinking fund schedule. They differ from PAC bonds whose amortization is guaranteed as long as prepayments on the underlying mortgages do... Read More

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