When a government borrow money from the public on a long-term basis, it usually does so by issuing debt securities, typically referred to as government bonds. A bond that is issued in Europe or in the US by an Australian company and that pays interest and principal to the lender in Australian dollars would be considered as a Eurobond. Focusing on the topic from FINC20018 Managerial Finance, briefly discuss the innovations in bond market.

When a government borrow money from the public on a long-term basis, it usually does so by issuing debt securities, typically referred to as government bonds. A bond that is issued in Europe or in the US by an Australian company and that pays interest and principal to the lender in Australian dollars would be considered as a Eurobond. Focusing on the topic from FINC20018 Managerial Finance, briefly discuss the innovations in bond market.

International Financial Management

14th Edition

ISBN:9780357130698

Author:Madura

Publisher:Madura

Chapter18: Long-term Debt Financing

Section: Chapter Questions

Problem 1ST

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National governments issue debt securities known as sovereign bonds, which can be denominated in either local currency or global reserve currencies, like the U.S. dollar or euro. (source (Links to an external site.)Links to an external site.). For this discussion question, first define what these bonds are. Why are these issued? Then discuss the issues that can arise when investors invest in these types of bonds. What are the advantages and disadvantages of these bonds? Are there unique issues that can arise only with this type of bond? Would you invest in sovereign bonds?
Define the following with formulaes if possible: • What do you mean by bond? • how bonds work • Focus in government bond • Par and face value • The relationship between interest rate and bond prices • The relationship between bond prices and other factors 2. Research about the economic outcome in many countries (and the global economy) and make your economic assumption in the following areas: • Economic growth forecast in key countries/regions • Exchange rate (bilateral exchange rates to Australian dollar) • Perspectives of government bonds in key countries/regions • Bond liquidity and current prices https://tradingeconomics.com/bonds
Why are UK government bonds considered a risk-free investment? Discuss the risk of exposed to market.
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Critique the distinctions between foreign bonds and Eurobonds, and explain why the Eurobonds have become the most popular form of international bond financing.
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