The Choice of Whether a Private Placement or a Public

question 38

Essay

The choice of whether a private placement or a public bond issue is undertaken depends on many factors. Three elements of primary concern are registration, interest rates and covenants. How do these affect the choice and why might a private placement be chosen?

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Definitions:

Government Securities

Financial instruments issued by a government to finance its projects and operations, commonly involving debt securities like bonds.

Interest Rates

The segment of a loan assessed as interest for the borrower, traditionally displayed as a yearly percentage of the loan's outstanding amount.

Tight Money Policy

A monetary policy that makes borrowing money more expensive and less accessible in order to reduce inflation.

Interest Rates

The proportion of interest a borrower is charged for loaned funds.