1) Stockholders can transfer wealth from bondholders through a variety of actions.

1.1. How would the following actions by stockholders transfer wealth from bondholders?

Answer each question.

1.a. An increase in dividends:

1.b. A leveraged buyout:

1.c. Acquiring a risky business:

1.2. How would bondholders protect themselves against these actions?

Answer each question.

1.a. An increase in dividends:

1.b. A leveraged buyout:

1.c. Acquiring a risky business:

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