#1. Many businesses issue loan notes, which carry the right for holders to convert them into ordinary shares in the same business at a later date. Why might a business choose to issue convertible loan notes rather than make an issue of equity in the first place? Question #2. Most businesses, particularly larger ones, have outstanding claims (financial obligations) of a wide variety of types from a wide variety of claimants at any given moment. Why is there this diversity? Question #3. Polecat plc has 18 million $0.50 ordinary shares in issue. The current stock market value of these is $1.70 per share. The directors have decided to make a one-for-three rights issue at $1.25 each. Julie owns 3,000 Polecat ordinary shares. Assuming that the rights issue will be the only influence on the share price: (a) What, in theory, will be the ex-rights price of the shares (that is, the price of the shares once the rights issue has taken place)? (b) For how much, in theory, could Julie sell the right to buy one share? (c) Will it matter to Julie if she allows the rights to lapse (that is, she does nothing)