euro dollar debt

Which statements are TRUE regarding Eurodollar bonds? I Eurodollar bonds are issued within the United States II Eurodollar bonds are Eurodollar bonds pay interest and repay principal in Euros IV Eurodollar bonds pay interest and repay principal in U.S. Dollars A I and III only BII and IV only CI, II, and IV DI, II, III, IV

The best answer is B. Eurodollar bond issues are sold overseas (In Europe), but pay in U.S. Dollars. They are not issued in the U.S.

All of the following statements are true regarding Eurodollar bonds EXCEPT: A Eurodollar bonds are issued by both domestic and foreign corporations Bpayment of interest and principal is made in either U.S. dollars or a designated foreign currency Ctrading does not take place in the United States Dthe securities are not registered with the SEC

The best answer is B. Eurodollar bonds are denominated only in dollars and are payable only in dollars. These bonds are issued by both domestic and foreign corporations outside of the U.S. markets to take advantage of lower interest rates. Since trading does not take place in the U.S., these securities are not registered with the SEC.

All of the following statements are true about Eurodollar bonds EXCEPT: AU.S. corporate issuers are not subject to foreign currency risk Bforeign corporate issuers are not subject to foreign currency risk Ctrading is centered in the European market Dthe bonds are issued in bearer form

The best answer is B. Eurodollar bonds are issued in bearer form outside the U.S. and trading is centered in London. Because the bonds are payable only in dollars, U.S. based issuers do not run any foreign currency risk. However, foreign issuers of Eurodollar bonds are subject to foreign currency risk. For example, if a British corporation issues Eurodollar bonds, and the British Pound declines in value relative to the dollar, then it will cost the British company more (in Pounds) to pay the debt service on the bonds.

Eurodollar bonds: I are issued in bearer form II are issued in fully registered form III pay interest which is subject to U.S. withholding taxes IV pay interest which is not subject to U.S. withholding taxes AI and III BI and IV CII and III DII and IV

The best answer is B. Eurodollar bonds are not offered in the U.S. and are issued in bearer form (remember that the U.S. has made it illegal to issue domestic bearer bonds!) These bonds are not subject to withholding taxes (once again, because they are not offered in the U.S.)

Which of the following would be purchasers of Eurodollar bonds? I United States investors II British investors III French investors IV Japanese investors AI only BII and III only CII, III, IV DI, II, III, IV

The best answer is C. Eurodollar bonds are purchased by foreign investors worldwide. They are bonds issued in Europe that pay in U.S. currency; and are attractive to investors who wish to receive payments in U.S. Dollars. U.S. investors cannot buy Eurodollar bonds because they are not registered with the SEC, and hence cannot be offered within the United States. Issuers use Eurodollar bond financing because there are fewer regulatory hassles (and costs) in issuing these securities, than with doing a similar bond offering in the United States.

Which of the following statements are TRUE about Eurodollar bonds?I Issuers include the United States GovernmentII Issuers do not include the United States GovernmentIII The bonds are only issued outside the United StatesIV The bonds are only issued within the United States A I and III BI and IV CII and III DII and IV

The best answer is C. Issuers of Eurodollar bonds include U.S. corporations, U.S. local and state governments, foreign corporations, sovereign governments, and supranational agencies. The U.S. Government does not issue Eurodollar bonds. Eurodollar bonds are only issued outside the U.S. and are purchased by foreigners. The bonds are not registered for sale in the U.S. The bonds are not subject to withholding taxes and are issued in bearer form.