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    Particulars MSFT 3 Year 5 Year 10 Year 30 Year

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    Asad Bilal
    Microsoft issued 4 debt securities with maturities of 3, 5, 10, and 30 years to raise $4.75 billion for general corporate purposes like working capital, capital expenditures, stock repurchases, and acquisitions. The securities were issued at a discount, resulting in yields to maturity higher than the coupon rates. Issuing multiple debt instruments allowed Microsoft to satisfy different investor preferences and reduce risk compared to a single large issuance.

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    Particulars MSFT 3 Year 5 Year 10 Year 30 Year

    Uploaded by

    Asad Bilal
    222 views2 pages
    Microsoft issued 4 debt securities with maturities of 3, 5, 10, and 30 years to raise $4.75 billion for general corporate purposes like working capital, capital expenditures, stock repurchases, and acquisitions. The securities were issued at a discount, resulting in yields to maturity higher than the coupon rates. Issuing multiple debt instruments allowed Microsoft to satisfy different investor preferences and reduce risk compared to a single large issuance.

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    Tombstones

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    Microsoft issued 4 debt securities with maturities of 3, 5, 10, and 30 years to raise $4.75 billion for general corporate purposes like working capital, capital expenditures, stock repurchases, and acquisitions. The securities were issued at a discount, resulting in yields to maturity higher than the coupon rates. Issuing multiple debt instruments allowed Microsoft to satisfy different investor preferences and reduce risk compared to a single large issuance.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    222 views2 pages

    Particulars MSFT 3 Year 5 Year 10 Year 30 Year

    Uploaded by

    Asad Bilal
    Microsoft issued 4 debt securities with maturities of 3, 5, 10, and 30 years to raise $4.75 billion for general corporate purposes like working capital, capital expenditures, stock repurchases, and acquisitions. The securities were issued at a discount, resulting in yields to maturity higher than the coupon rates. Issuing multiple debt instruments allowed Microsoft to satisfy different investor preferences and reduce risk compared to a single large issuance.

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    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 2

    To meet day to day expenses or to finance expansion strategy, firms need additional capital.

    There are
    number of ways, which organizations use to get additional funds. Most renowned and useful way to get
    additional finance is capital markets. Organizations issue their securities in these markets to meet
    requirements of additional capital. Firms usually issue two types of securities in these markets i-e shares
    or stocks and debentures or debt instruments. This report is based on selection of securities issues by
    the organization in

    a) Microsoft is a large organization and they have issued unsecured securities in the form of debt.
    They have issued four different types of securities, which vary on the basis of tenure and coupon
    or interest rates. Microsoft has issued these securities to raise $4.75 billion to support their
    needs of additional funds. They have raised this capital for general corporate purposes. The
    term corporate purposes includes the need of working capital, capital expenditure to purchase
    land, building and equipment, these funds will also be used to repurchase the stock in order to
    increase the value of shares and it will also be used in acquiring other firms in same or different
    businesses to increase firm size.
    b) These instruments or paper issued by Microsoft is not cheap, because yield to maturity of these
    notes is not high, therefore the organization will not pay premium amount paid or premium
    added to rate of notes is low. In this condition investor will get less amount on same risk level, it
    shows that these papers are not cheap.

    Tables

    Particulars MSFT
    3 Year 5 Year 10 Year 30 year
    Bond Price 998.35 995.61 991.36 989.11
    Face Value 1000 1000 1000 1000
    Coupon Rate 0.875% 1.625% 3% 4.50%
    Years to Maturity 3 5 10 30
    YTM 0.93 1.72 3.1 4.57

    c) Yield to maturity (YTM) of four securities issued by Microsoft is different from their coupon rate.
    Reason of difference in coupon rate and yield to maturity is that these securities are issued on
    discount rate. If the face value and bond price is same then the resultant YTM will be equal to
    the coupon rate. Yield to maturity (YTM) should always be compared with coupon rate of notes
    or securities.
    d) Microsoft issued 4 papers rather than one is on the grounds that hazard assorted, with just 1
    paper there is an incredible danger for them, suppose it is possible that individuals would prefer
    not to purchase the sort of paper they issued, with the 4 papers individuals can get diverse
    alternatives, a few individuals need long haul paper and a few individuals need transient paper.
    Microsoft can diminish the danger of losing with 4 papers. Likewise with these 4 sorts of papers,
    it is conceivable that Microsoft had diverse uses for these cash, they may require some cash for
    some transient objective and some cash for their long haul speculation, in light of the fact that
    they require cash at distinctive times, so they issue the 4 papers with diverse time plots, they
    can utilize these cash on distinctive things. Financial specialists need distinctive papers for
    diverse times, a few individuals may need the fleeting paper so they can recover their cash
    rapidly furthermore make some quick choices.
    e) Microsoft has also included an option of buyback, which gives Microsoft a power or right to buy
    back the securities issued anytime, when they consider it right.

    2a) Table

    Particulars CCE
    3 Year 6 Year
    Bond Price 998.12 992.27
    Face Value 1000 1000
    Coupon Rate 3.75% 4.25%
    Years to Maturity 3 years 6 year
    YTM 3.82 4.4

    2b) Coca Cola enterprise has also issued two securities or paper to raise an additional funds of six billion
    dollar. The major difference in securities of CCE from MSFT is that these notes will be repurchased or
    redeemed by paying the additional cash flows discounted at rate plus .40% additional rate. This quality
    differentiates CCE note from the note of MSFT. They have also issued to series to provide diverse nature
    of securities in market in order to attract large customers.

    2c) Coca Cola enterprise credit rating is included in first three highest ratings. Their rating is A3, which is
    lesser than credit ratings of MSFT. They have already taken a large amount of funds in the form of debt,
    which has increased the risk, default risk on investors.

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