Question

1. State three reasons why a company may have raised capital by issuing a Eurobond rather than fixed interest stock.

Answer 1

Fixed interest stocks are nothing but preferred shares.

1. The cost of raising capital through debt is cheaper than through equity.

2. The company can claim tax deduction on the interest expenses of the eurobond.

3. The company need not seek permission with the bondholders to take some corporate actions, while on the other hand, the company needs to hold periodic meetings with preferred shareholders and disclose information to them periodically.

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