MAN ch 12

3 features of the Eurobond Market

(a) an absence of regulatory interference (b) less stringent disclosure requirements van and most domestic bond markets (c) a favorable tax status

The growth of the global capital market during recent decades can be attributed to

Advances in information-technology, the widespread deregulation of financial services, and the relaxation of regulations governing cross-border capital flows

Eurocurrency

Any currency banked outside of its country of origin. For example euro dollars which account for about two thirds of the euro currencies are dollars banked outside of the United States

Eurobonds

Are normally underwritten by an international syndicate of banks and placing countries other than the one in whose currency the bond is denominated

Foreign Bonds

Are sold outside the borrowers country and our denominated in the currency of the country in which they are issued

The global capital market provides greater opportunities for

Businesses and individuals to build a truly diversified portfolio of international investments and financial assets which lower risks

The Eurobond market is an attractive way for

Companies to raise funds due to the absence of regulatory interference, less stringent disclosure requirements, and Eurobonds favorable tax status

International Bonds are 2 types

Foreign bonds and Eurobonds

Relative to a domestic capital market, the global capital market allows

Investors to diversify proof Bolios to holdings internationally thereby reducing risk

One major implication of the global capital market for international business

Is that companies can often borrow funds at a lower cost of capital and the international capital market than they can and the domestic capital market

A Eurocurrency is any currency banked

Outside it's country of origin. The lack of government regulations make the euro currency market attracted to both depositors and borrowers. Due to the absence of regulation the spread between the euro currency deposit and lending rates is less than the spread between a domestic deposit and lending rates. This gives Eurobank a competitive advantage

Many companies are now listing their stock in the equity markets of other nations primarily as a

Prelude to issuing stock in those markets to raise additional capital. Other reasons for listing stock and another countries exchange are to facilitate future stock swaps; to enable the company to use its stock and stock options for compensating local management and employees; to increase the companies visibility among its local employees, customers, suppliers, and bankers

Foreign investors are investing in other countries equity markets to

Reduce risk by diversifying their stock holdings among nations

When borrowing funds from the global capital market companies must weigh

The benefits of a lower interest rate against the risk of greater real cost of capital due to adverse exchange rate movements

The global bond market has two classifications:

The foreign bond market and the Eurobond market. Foreign bonds are sold outside of the borrowers country and are denominated in the currency of the country in which they are issued. A Eurobond issue is normally underwritten by and international syndicate a banks and placed and countries other than the one in whose currency the bond is denominated. Eurobonds account for the lion share of international bond issues

The function of a capital market is

To bring those who want to invest money together with those who want to borrow money