Ch 12 Global Capital market D 300 exam 2

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Ch 12 Global Capital market D 300 exam 2
2015-03-13 12:45:58
exam 2
exam 2
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  1. Capital markets
    • bring together investors and borrower with market makers as intermediaries
    • Investors: corporations with surplus cash or individuals
    • Borrowers: individuals, companies, governments
  2. global capital market
    • for borrowers
    • - larger pool of investors ,  large supply of funds, lowers cost of capital
    • for inverstors
    • - A wider range of invertmenmt options, diversifying portfoli internationally, lower risk
    • london is the leading center of Eurocurrency trading
  3. Eurocurrency
    • any currency banked outside its country of origin. Ex  Eurodollar- 2/3 of all Eurocurrencies
    • The Eurocurrency market is an important and a relatively low cost source of funds for international companies
    • London is the leading center of Eurocrrency trading
  4. Bond market
    • an important means of financing for a company
    • most common type of bond fixed-rate bonds
    • types of international bonds
    • Foreign bonds  if there is a match between the countny
    • Eurobonds if there isnt a match
  5. global Equity Market
    • Allows firms to attract capital from international investors
    • is all about company ownership, this is the main difference between bonds and equity
  6. Foreign Exchange Risk
    • in general firms can borrow funds at lower cost in global capital market then in the domestic market
    • Firm can hedge against this risk by entering into forward exchange contract
  7. Eurobonds and there advantages
    • are normally underwritten by an international syndicate of banks and placed in countries other than the one in those currency the bond is denominated
    • Less stringent government regulations
    • Less stringent disclosure requirements
    • Favorable tax status
  8. Cost of capital when exchange rates fluctuate (calculations)