Develop brief answers to each of the following questions:

1. How does a lender assets the risk that a borrower may default-that is, not pay interest and principal when due?

2. If a company with a high debt to equity ratio wants to increase its debt when the economy is weak, what kind of bond might is issue?

3. Why might a company lease a long-term asset rather than buy it and issue long-term bonds?

4. Why are callable and convertible bonds considered to add to management’s future flexibility in financing a business?