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Give factors to consider when choosing between Euromarkets or Domestic Markets.

Highlight the factors to consider when choosing between Euromarkets or Domestic Markets.

Answers

Maurice
(i) Timing and speed.
It may be possible to raise money on the Euromarkets more
quickly than in the domestic markets.

(ii) Security; Euromarkets loans are usually unsecured, whereas, domestic market loans
are more commonly secured. Large borrowers may therefore prefer Euromarkets.

(iii) The size of the loans.
It is often easier for a large multinational to raise very large
sums on the Euromarkets than in a domestic financial market.

(iv) The currency that the borrower wants to obtain Multinational companies usually want
to borrow in foreign currency to reduce their foreign exchange exposure and therefore
borrow in Euromarkets rather than the domestic market.

(v) The cost.
There is often a small difference in interest rate between Eurocurrency and
domestic markets. On large borrowings, however, even a small difference in interest
rate result in a large difference in the total interest charged on the loan.
maurice.mutuku answered the question on April 25, 2019 at 07:40

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