The price reduction amounted to $600 million (i.e., $10.3 -$8.5/(1.00-.125) = $10.3 – 9.7 =$.6). The amount of cash invested in the transaction by the buyout firms totaled $6.2 billion ($8.5 -$2.3).
-Why did banks lower their lending standards in financing LBOs in 2006 and early 2007? How did the lax
standards contribute to their inability to sell the loans to investors? How did the inability to sell the loans once made curtail their future lending?

Question

The price reduction amounted to $600 million (i.e., $10.3 -$8.5/(1.00-.125) = $10.3 – 9.7 =$.6).  The amount of cash invested in the transaction by the buyout firms totaled $6.2 billion ($8.5 -$2.3).
-Why did banks lower their lending standards in financing LBOs in 2006 and early 2007? How did the lax
standards contribute to their inability to sell the loans to investors? How did the inability to sell the loans once made curtail their future lending?

Quizplus · Accepted Answer

The Answer of The price reduction amounted to $600 million (i.e., $10.3 -$8.5/(1.00-.125) = $10.3 – 9.7 =$.6).  The amount of cash invested in the transaction by the buyout firms totaled $6.2 billion ($8.5 -$2.3).
-Why did banks lower their lending standards in financing LBOs in 2006 and early 2007? How did the lax
standards contribute to their inability to sell the loans to investors? How did the inability to sell the loans once made curtail their future lending?

The Price Reduction Amounted to $600 Million (I