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.