Question

Eurobonds:

1) can be issued only by European firms.
2) can be sold only to European investors.
3) can be issued only by European firms AND can be sold only to European investors.
4) None of these are correct.

Answer 1

Eurobonds are not limited to European entities; they can be issued by any international issuer and sold to investors worldwide. They differ from bank loans, which might suit smaller firms that banks can monitor more closely, while more prominent firms tend to issue bonds for capital.

Step-by-step explanation:

The correct answer to the question on Eurobonds is 4) None of these are correct. Eurobonds are not restricted to European firms or investors. They are international securities issued by a company, government, or other organization that seeks to raise capital from investors outside their own country. These bonds are typically issued in a currency different from the currency of the country where the bonds are issued. For instance, a Japanese company might issue Eurobonds in US dollars to investors in Europe. A key feature of Eurobonds is their flexibility, as they can be issued and sold globally to a diverse group of investors.

Bank loans differ from bonds in that they are typically more customized and may be more appropriate for smaller firms that the bank can monitor closely. Large or well-known firms often prefer issuing bonds to leverage their broader market reputation and raise capital for investments, payoff old bonds, or facilitate acquisitions.