Introduction to Finance

GLOBAL
Many U.S. corporations have issued Eurodollar bonds. 
Eurodollar bonds 
are dollar-
denominated bonds that are sold outside the United States. Because of this, they escape 
review by the SEC, somewhat reducing the expense of issuing the bonds. Eurodollar bonds 
usually have fi xed coupons with annual coupon payments. Most mature in fi ve to ten years, 
so they are not attractive for fi rms that want to issue long-term debt. Most Eurodollar bonds 
are debentures. This is not a major concern to investors, as only the largest, fi nancially 
strongest fi rms have access to the Eurobond market. Investors 
do 
care that the bonds are 
sold in bearer form because investors can remain anonymous and evade taxes on coupon 
income. Some researchers believe this is the main reason Eurodollar bond interest rates are 
low relative to U.S. rates.
6
junk bonds (high-yield bonds) 
bonds with ratings that are below 
investment grade; that is, rated Ba1, 
BB+, or lower
Eurodollar bonds 
dollar-
denominated bonds sold outside 
the United States
5
Lucinda Shen, “Now There Are Only Two U.S. Companies with the Highest Credit Rating,” 
Fortune
, April 26, 2016, 
(http://fortune.com/2016/04/26/exxonmobil-sp-downgrade-aaa/ accessed May 28, 2016); Reuters, Vipal Monga, 
and Mike Cherney, “Lose Your Triple-A Rating? Who Cares?” 
The Wall Street Journal
(April 29, 2014), pp. B1, 
B6; “S&P strips Pfi zer’s AAA rating on Wyeth acquisition” (October 16, 2009) http://www.reuters.com/article/
companyNews/idUKN1636373320091016 (accessed October 17, 2009); Sereno Ng, “Junk Turns Golden, but May 
Be Laced With Tinsel,” 
The Wall Street Journal
(January 4, 2007), pp. C1, C2; Nicholas Riccio, “The Rise Of ‘B’ 
Rated Companies And Their Staying Power As An Asset Class,” S&P’s 
CreditWeek
(January 3, 2007).
6
W. Marr and J. Trimble, “The Persistent Borrowing Advantage of Eurodollar Bonds: A Plausible Explanation,” 
Journal 
of Applied Corporate Finance 
(Summer 1988), pp. 65–70.

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C H A PT E R 1 0 Bonds and Stocks: Characteristics and Valuations
U.S. fi rms aren’t the only issuers of securities outside their national borders. For example, 
foreign fi rms can issue securities in the United States if they follow U.S. security registration 
procedures. 
Yankee bonds 
are U.S. dollar denominated bonds that are issued in the United 
States by a foreign issuer. Some issuers fi nd the longer maturities of Yankees attractive to meet 
long-term fi nancing needs. While Eurodollar bonds typically mature in fi ve to ten years, Yankees 
may have maturities as long as 30 years. Nonetheless, the euro (
€
) is becoming a strong 
competitor to the U.S. dollar for fi rms that want to raise funds in a currency that has broad 
appeal to many investors.
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Increasingly, the international bond market is ignoring national boundaries. A growing 
number of debt issues are being sold globally. The World Bank issued the fi rst