MSF274(11B)

MSF274(11B) - Money and Capital Markets (#2) US Domestic...

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    Money and Capital Markets (#2)
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US Domestic Market: 2011 US $77 Trillion 68% 32% Debt Equity
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Financial Markets and Geography International Market Security Issued Outside Country of Currency Foreign Market Security Issued by Non- resident in Currency of Country Domestic Market Security Issued in Country of Currency by Resident Global Market - Large Security Issued in Two or more Regions of World Market 3
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International and Foreign Market 97 3 0 10 20 30 40 50 60 70 80 90 100 Capital Money Percent Market Growth: 16% per Year Maturity (2011) 4
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International and Foreign Bond Characteristics Bond Structure (2011) Bond Currency (2011) 5 3 8 39 45 0 5 10 15 20 25 30 35 40 45 Other Yen Pound USD Euro Percent 2 29 69 0 10 20 30 40 50 60 70 Equity-link Floating Straight Percent 5
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Republic of Turkey 1,000,000,000 € 10 year 6.5% Fixed-rate, Payable Annual B1 and B+ Rating 1,000 €, 10,000 €, 100,000 € Listed: Frankfurt and Luxembourg Fund maturing debt Fund debt called Increase reserves Finance fiscal deficit Obtain project financing Manage asset/liability portfolio Sovereign and Corporate Bonds 6
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Money Market Financial Market T-bill yield is proxy for the “risk-free” rate Benchmark for many financial models Corporate Finance Source of funds Bank (prime) Commercial paper Use of funds Cash management Marketable securities 7
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Capital Market Financial Market T-bond yield is proxy for “risk-free” rate Benchmark for many financial models Corporate Finance Impacts cost of debt (Kd), equity (Ke) and capital (Ko) Cost of capital is the minimum rate required for capital budgeting decisions 10
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Pricing International Bonds An asset is worth
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This note was uploaded on 02/29/2012 for the course FINA 274 taught by Professor Williamhandorf during the Fall '11 term at GWU.

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MSF274(11B) - Money and Capital Markets (#2) US Domestic...

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