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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
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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