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CFA Level I · CFA Level I Exam · Fixed-Income Issuance and Trading

An investor compares a Eurobond issued by a Brazilian company, denominated in euros and sold to investors across several countries, with a foreign bond. Which statement is most accurate?

A Eurobond is issued outside the jurisdiction of any single country, while a foreign bond is sold by a non-domestic issuer within a domestic market, in that market's currency and under its regulation. The other statements wrongly tie Eurobond currency to the issuer's home or reverse the regulatory treatment.

  1. AThe Eurobond is issued outside the jurisdiction of any single country, whereas a foreign bond is issued by a non-domestic issuer in a domestic market and currencyCorrect
  2. BThe Eurobond must be denominated in the currency of the issuer's home country, whereas a foreign bond must be denominated in euros
  3. CThe Eurobond is subject to the securities regulation of the country whose currency it uses, whereas a foreign bond is not subject to local regulation

Explanation

Eurobonds are issued outside any single country's jurisdiction and may be in a currency different from the issuer's home or the market where sold, so they are lightly regulated. A foreign bond is sold by a foreign issuer in a domestic market, in that market's currency, under local rules (for example a Samurai or Yankee bond). The other statements reverse these features.

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