ACCA Financial Management (F9) Certification Practice Exam

Eurobonds refer to bonds that are issued in a foreign country and denominated in a currency different from that of the issuing country. This concept allows issuers to tap into international markets and attract investors from different countries by offering securities in currencies that may be more favorable or desirable to them. It helps issuers diversify their funding sources and offers investors the opportunity to invest in projects outside of their home currency and market.

The idea behind Eurobonds is rooted in the need for issuers, whether they are corporations or governments, to raise capital without being limited to their domestic capital markets. This flexibility can be beneficial in various economic conditions, where investors seek to reduce currency risk or where interest rates may be more attractive in different countries.

Other options provided do not accurately define Eurobonds. Bonds issued in the home country’s currency would not be classified as Eurobonds since they do not involve the characteristics of international issuance or foreign currency. Similarly, bonds backed exclusively by euro currency do not encompass all Eurobonds, as these bonds can be issued in multiple currencies. Finally, while government bonds can be issued in various European markets, this definition does not encapsulate the broader scope of Eurobonds, which may include corporate entities as well.