Hello,

I would like to check a model answer for the following question:

A) Stockholders can transfer wealth from bondholders through a variety of actions. How would the following actions by stockholders transfer wealth from bondholders?

i) An increase in dividends

ii) A leveraged buyout

iii) Acquiring a risky business Is there any way for bondholders protect themselves against these actions?

B)Explain the reason behind the most common stock price reaction of bidder and target firms when a possible takeover is announced.

Thanks a lot.