Basic Components Of A Firm Capital Structure 538444

Compare and contrast the basic components of a firm’s capital structure – debt and equity. Why is the required rate of return on a firm’s equity capital typically higher than that for the firm’s debt?

What would be the effect on the price of bonds of (1) an unexpected rise in interest rates, and (2) an unexpected fall in interest rates? Would these interest rate changes have a similar effect on the price of shares? Explain.