Bonds and Their Valuation

Why do entities borrow in the form of debt obligations? Economies around the world were still recovering during 2012 after the 2008-2009 recession. Governments and central banks continued their efforts to facilitate economic recovery. The U.S. Federal Reserve Bank (the Fed) kept interest rates at record lows. This, along with several other reasons, found the bond markets flooded with new bond issues. The following article highlights some reasons why firms issued debt obligations to raise funds. In the context of the reasons why entities borrow in the form of bond issues, which statement is correct? Check all that apply. When government entities need to raise funds to finance projects, they issue debt securities in which investors are the creditors who usually earn a fixed rate of return from the borrower. Several bond issues such as general obligation (GO) bonds and revenue bonds-offer federally tax exempt income that attracts Investors seeking tax-free income. When bonds issued by foreign governments offer higher yields than U.S. Treasury yields, corporate issuers in the United States get the opportunity to issue debt securities at low costs. When lending money to corporations, banks often include restrictive covenants, such as maintaining a certain level of debt-to-equity ratio at all times