Zero coupon bonds. These bonds do not pay interest. They are issued at a price lower
than their reimbursement value to take care of yield for investors. Purchasers of these
bonds pay no income tax as they do not receive interest payments. They pay taxes at a
lower rate on long-term capital gain when the bonds are refunded at face value. They are
more often issued by blue chip companies as the default risk is concentrated on the
reimbursement on maturity.
- Importance of Euro-shares
Euro-shares present several advantages for companies taking recourse to them:
- They improve the prestige of the company in the eyes of international financial
community. Such prestige is important for the groups that have a good part of
their turnover generated in foreign countries. - They facilitate the operations of external growth. A company quoted on a foreign
market may proceed to make public offers of exchange when it wants to have a
control on some enterprises quoted on the market. - They reinforce internationalization of capital. This internationalization ensures a
greater stability of capital since it allows an international diversification. Besides,
pension funds may invest in long-term international shares. - However, the fact that international investors become important participants in
this market poses numerous problems as regards control and management of the
group.
The World Bank Group
The World Bank Group is a multinational financial institution established at the end of
World War II to help provide long-term capital for reconstruction and development of
member countries. The Group comprises three bodies: the International Bank for
Reconstruction and Development (IBRD), the International Development Association
(IDA) and the International Financial Corporation (IFC).
The IBRD, also known as the World Bank, makes loans at nearly conventional terms for
projects of high economic priority. A government guarantee is a necessity for World
Bank funding. The bank’s main emphasis has been on large infrastructure projects such
as roads, dams, power plants, education and agriculture. Of late, the bank has been
emphasizing over quick loans to help borrowing countries alleviate their balance-of-
payment problems. These loans are tied to the willingness of the debtor nations to adopt
economic policies that will spin growth: free trade, more open economy and more
vigorous private sector.
The IDB, unlike the IBRD, is authorized to make soft (highly concessionary) loans (for
example, 50 year maturity loans with no interest). It does, however, require a
government guarantee.