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Just a random example of bond math, fwiw.

Firm issues 4% bonds at par for 10 years, rates stay flat, price is 100 throughout by definition, PV is $67.5 if I've done my math right.

Firm issues 4% at par, rates go to 8%, price falls to $72.8, PV is $33.7, or half of the scenario above, as you'd expect.

Of course, rates won't go up 400bps overnight, just as an example.


BUT, if you can handle the leverage, buying $100 of stock now for price of low-rate, tax-deductible interest, and owe $67.5 in the future

OR if you think rates are destined to rise significantly, for $33.7 in the future + tax-deductible interest, well....seems like you should buyback stock.


N.B. this has nothing to do with GM's Option Egregiousness argument above. Just talking about buybacks at a simplified level.
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