INTRODUCTION

Because they mobilize funds in a nation's economy, primary and secondary markets, as well
as enterprises, organizations, and governments, all profit from their coordinated operation.
Investors provide funding for the use of through consumer spending and increasing
commerce and investment, the market capital outlays. Companies are able to raise money and
reap the rewards of Limited Liability, Transferable Ownership, and Permanent Continuity.the
main marketplace enables more direct communication between investors and the company
than the  secondary market that enables investor trade, sometimes with the assistance of 
brokers. The secondary market's application of the economic forces of supply and demand
assist in ensuring the correctness of asset values. The secondary market can also be utilized to
measure the state of the economy

QUESTION 1

1.1 Describe the duties, rights, and obligations of the board of directors, the executive
management, and the shareholders.

Shareholders

Rights

 Shareholders have the right to vote in the affairs of the corporation, in particular vote
on Resolutions that are opted for in a company’s meeting( Price, N. (2019).
 At any time, the shareholders have the potential to select the board of administrators
in their business enterprise.

 Shareholders have the proper to participate in each day manipulation and operations
of the agency on an everyday foundation..

Roles and Responsibilities

Look for signs that businesses are stable financially and will continue to expand and provide.

Board of Directors

Rights
They have the strength to make decisions, function as independent observers, and behavior an
unbiased audit of the accounting and monetary reporting of the company.

Roles and Responsibilities

 Decide which rules and goals are maximum appropriate for the employer’s operation

and operation.
 Directors have the legal responsibility to ensure that the corporation operates in the
best interest of the shareholders and not otherwise (Price, N. (2019).
 They’re in the price of hiring, terminating, and overseeing the chief executive officer
and other pinnacle management executives.
 One of the board of directors' roles is to make sure that the business enterprise
agency runs correctly and that the interests of the shareholders are taken into account.

Executive Management

Rights

Any private interests that government management may have in a transaction that a company
can also recommend are subject to claim.

Roles and Responsibilities

 Set the strategy and structure of the company by evaluating the present and future
opportunities, threats, and weaknesses of the company, The Directors Academy.
(2006)

 They define the board's monitoring requirements for ensuring that the agency's inner
control is in pinnacle running order.
 The government management is likewise in the price of the board of administrators,
ensuring that they efficaciously report to the employer's shareholders

1.2 What are the benefits of a corporate form of business and why do companies pursue
listing as publicly traded corporations??

The company belongs to the reviewing company when its shares are listed and finally
reported to the stock exchange. By using this strategy, the corporation creates the standard
ratio as its top equity offering, giving investors who choose to purchase those kinds of stocks
ownership of the company. In order to increase public awareness of their mission, goals, and
products, organizations try to be categorized as public organizations as a stop result. This
methods also enable society to access a vast pool of debt and economic equity that helps
identify large-scale value-added benefits.

This capital is then used to fund various sectors in the business such research and
development. Furthermore, having a corporate will mean that the founding individuals will be
provided with an easy opportunity to exit the company at the time they would like to, added
Balasubramaniam, K. (2020)

Here are the benefits of having a business form

 When it comes to buying other businesses, groups may additionally have the functionality
to assist each one-of-a-kind in phrases of protection.

 While organizations get loans from monetary institutions, they benefit extra-economic
electricity.

 While an enterprise is listed as an organization, it gains marketplace publicity by way of

manner of attracting hedge price range and institutional consumers.

 The dangers of inventory ownership can be mitigated by way of making an investment in a

numerous portfolio of shares.

 The general list of proxy licenses limits the liability of shareholders for proxy loans.

1.3 Relationship between maximizing shareholder value and the agency theory's stated
issues

The Board of Directors can use the shareholder value proposition to develop goals and
policies appropriate for the company’s success. It guarantees that management will take steps
to increase the company’s stock price. Whereas the agency theory is the one that considers
the potential problems that may arise from the separation of ownership as well as the control
of the organization, (Viney, H. (2017).

Managers may not always adhere to the desired standards because they are responsible for
managing operations. In the case when managers are not working in the best interest of the
shareholders, such as increasing staff levels for power and prestige, increasing remuneration
schemes as well as increasing sales at the expense of sustainability, added (Viney, H. (2017).
As a result, the board of directors is anticipated to place into impact tips which might be
within the quality pursuits of every manipulate and shareholder. in the end, the company will
usually try to perceive answers to any potential traumatic situations that the employer can
also moreover face.

1.4 The cash flow of listed companies seeks equity financing.

The stock market provides to the smooth functioning of the monetary plan by issuing new
bonds in the basic retail and business in existent bonds in the secondary retail. The main
objective of the primary market is to carry out the raising of capital that are listed publicly by
corporations through the issue of new equity-based to investors, as stated (Viney, H. (2017).

Additionally, the basic impartiality security circulated at the party's initial public offering
(IPO) concede possibility be bought through private placements with institutional
shareholders or from identified shareholders. Hybrid instruments, which contain convertible
notes and choice stocks, may be issued in this situation for the time being.

In addition the major stock exchanges that issue outstanding stock provide businesses with
the necessary working capital.

1.5 Talk about the equity market's secondary market function and how important it is
to corporations.

The worth of the secondary market is to provide the market with an easy and effective habit
to buy and sell recently exchange securities. The subordinate advertise also ensures that
buyers are willing to buy new offerings of securities and open them at various market prices
from now on.

The current market price is advised to be the range where it can reflect the performance
outcomes and it should also forecast prospects of the companies that are listed as individuals
within in the relevant industry sector, as well as the global economies, (Viney, H. (2017)

Furthermore secondary market trading includes a variety of asset classes branded as both
equity and debt and common stock options and payments received to be issued. Even more
so. The secondary market as a network of primary markets must emphasize economic growth
from primary finance. Finally the securities traded on the primary market are supplied on the
secondary market.
1.6 Describe the equity market's liquidity and explain why it is crucial for both
shareholders and the company.

Liquidity of the equity market is defined as the extent to which a market such as the stock
market allows assets to be sold and bought at transparent and stable prices without unduly
interrupting the current market price of the shares that are being traded, explained Chen, J.
(2020).

Measuring the share market equity is done through finding the ration of the turnover value to
the capitalization of the market, which is then calculated by multiply the current market price,
with the number of shares issued, described (Viney, H. (2017)

 Due to the liquidity of the secondary market, buyers are urged to buy new offerings
from corporations. Investors feel more secure knowing their shares will be bought
without suffering price losses as a result.

QUESTION 2

a) Debentures and unsecured notes

Debentures

Debentures are contracts between the lender and the borrower that specifies the amount of
interest payments during the term of the loan term, and receive the face value of the
instrument on maturity,(Scott, G. (2020).

Debentures are marketable instruments that businesses can issue to obtain long-term
borrowing without putting up collateral or lowering their equity. A debenture is a long-term
corporate financing product that lacks any form of collateral.

The note holder is liable to pay the full amount if the property owner is always not satisfied
with the sale. They’ll be bonds that aren't subsidized through collateral and depend
completely at the lender's trustworthiness and popularity for help. A hard and fast price or a
floating rate debenture can be issued. The floating price is obtainable over assets which is
probably as usual,
Traded by the business for example stock and whereas the fixed charge is offered over
permanent assets such as equipment, as described (Viney, H. (2017)

Bonds are a type of security added to corporate bonds in the form of the liquid value of the
unmanaged assets of the issuing company. The fixed charge debenture holders are allowed to
proceeds of the sale of the assets over which the charge has been placed,(Viney, H. (2017)

The note holder is liable to pay the full amount if the property owner is always not satisfied
with the sale. Moreover, the floating charge debenture holders do not have any claim over the
proceeds from the sale of the given assets, however, they rank ahead of unsecured creditors in
their entitlement of the proceeds of the sale of the assets, added (Viney, H. (2017)

Debentures is also issued to most of the people additionally to institutional consumers. The
public, then again, includes a Debentures are available 2 varieties: senior and subordinated,
with senior debentures having a priority claim over dividends on the company's financial gain
distribution and assets within the event of bankruptcy .

The debenture will either be convertible or nonconvertible; the former means that the holder
will have the option to convert it into equity shares in the issue corporation at a later time.
Due to the fixed type of interest that was stipulated at the time of entering into an associate
degree agreement (indenture), debenture holders is also harmful once market rates rise higher
than the contractually in agreement rates, probably lowering their yields compared to current
investments that pay a floating rate in line with the promoting extended list of jail wants,
which might be slow to develop.

Unsecured notes

The unsecured notes are the type of corporate bonds that are issued on a basis that is not
secured. Meaning that they are the type of loans that are not secured by the issuer’s assets,
and it is a riskier prospect for any investors ( Chen, J. (2018). And these corporate bonds
possibly issued as private placements or public shares both of that require the preparation of a
prospectus.

A loan that is not backed by the issuer's assets is referred to as an unsecured note. Debentures
and unsecured notes both offer a fixed rate of return. A debenture offers more security than
unsecured notes do. These notes are frequently subordinated and uninsured as well. The note
is laid out for a specific amount of time.
Unsecured notes can be sold to both institutional and private buyers. Unsecured notes are also
known to yield more than debentures, indicating that the underlying security makes them less
risky.

The issuance of debentures and unsecured notes should grant the debtors access to the
budget.

Due to the increased risks involved with this type of bond, purchasing a credit rating for the
issue is necessary. The higher the score, the more likely it is that unsecured notes will be
issued. Furthermore, the debentures demand high credit ratings even when the safety reduces
the payout. As a result, commercial banks, multinational corporations, and financial
institutions have trouble issuing debentures and unsecured notes.

They produce higher rates of return, which offset the investor's lower initial investment.

There is a higher risk of default with unsecured notes because, in the event that a company
has financial difficulties that impact its capacity to make payments, the shareholder would
escape their money without being entitled to the firm's assets or earnings.

They frequently lack insurance coverage and have the lowest priority claim on the assets and
revenue of the company in the event of bankruptcy.

b) Corporate bond market

Unsecured notes may be purchased by both institutional and general consumers. Unsecured
notes are also found to yield more than debentures, suggesting that the underlying security
may make them less volatile.

The issue of debentures and unsecured notes should allow the borrowers access to capital.

Due to the increased risks involved with this type of bond, issuing corporate bonds requires
the acquisition of a credit score rating for the risk, and the higher the score, the more probable
it is that unsecured notes will be issued. Furthermore, the debentures demand high credit
ratings even though the protection reduces the payout. As a result, financial institutions,
commercial banks, and
Furthermore, corporations gain the opportunity to diversify their sources of funding, meaning
that they can even borrow directly from the market, and thus, this allows them to choose the
most effective cost sources, stated (Viney, H. (2017).

Why are companies trying to raise debt capital directly from the market?

They do this to defer the financial intermediation fees charged by financial institutions to
financial institutions and by doing so they can save the margin costs that financial institutions
have not incurred since borrowing from banks. Multinationals can issue unsecured bonds and
notes.

Meaning that providing debt funds directly to the market will mean that the investor will get a
high return for lending funds directly to the market since this action is done through
accepting credit risk, as explained (Viney, H. (2017).

Where do funding for foreign direct investment originate?

The liberalization of financial instruments and the removal of cash flow barriers have
supported and encouraged the expansion of direct financial markets across all sectors..

The government has worked to reduce debt owed to citizens by providing additional funds for
direct investment. Opening a subsidiary or associate firm abroad, buying a controlling stake
in an existing overseas business, merging with another foreign business, or forming a joint
venture are all examples of ways to make foreign direct investments.

Why do investors provide debt funds directly to capital markets

Investors will confirm the credit risk and good-value against bad-value investments of every
emitting partnership alone before investment as a result of to the capital markets' sleek access
to investment news. As a result, they'll give credit to suit associations, and tax incentives for
his or her own associations facilitate them to keep up robust balance sheets.

Additionally, shareholders create direct investments in capital markets to diversify their

investment portfolios in an exceedingly habit that balances the danger guide extreme-risk
investments and keeps their portfolios smart.

Corporate bonds alter investors to stay the required liquidity as a result of the debt is quickly
changed when being sold , that more interprets into lesser risk.

c) The amount that the company raised when the debentures were first issued.
The initial issue value for the first issuance of the Bills, as provided by the Corporation, shall
be utilized to calculate the initial value of the Bills. The face value of the note will be equal to
the fixed interest rate that was applied to it when it was issued because the actual yield is
equal to that amount. Therefore, the face value will be: = $ 1000000 (11) = $ 1000000. It
would cost $100,000 to respond.

d) The current debenture's value price in the secondary market

Since

 P=[C[1−(1+i)−n
 i ]+ A (1+i)−n]

The face value's present value will be:

 A (1+i)−n
 $ 1000000 (1+0.132 )−12
 .$ 496969.36

The coupon stream's current value will then be:

 C[1−(1+i)−n
 i ] , Where C=$1000000/0.065 =$65000
 = $65000× [[1−(1+0.06)−12 0.06 ]
 = $544949.86

Consequently, the face value of the debentures plus the present value of the coupon
stream will determine the price.

 $ 496969.36+ $544949.86
 =$1 041 919 .22

e) Explain why the value of the debenture has changed

Bond prices have risen as market yields have fallen to 12%. This creates an inverse
relationship between changes in interest rates and changes in bond prices in that market.
Refinancing in the market has also led to changes in bond fees. This suggests that if the
market sees a short-term convertible, the maturity convertible will take control.
Conclusion

The financial actions of investors, firms, and governments have a substantial impact on the
production and sale of goods and services in an economy.

Investments will enable manufacturing by making the necessary resources available.

Corporations can also benefit from investor capital by using it for mergers, acquisitions,
brand-new initiatives, and research and development. Governments are able to maintain the
nation's financial stability in terms of its asset base because of the interdependence of reliable
individual, household, and business economic activity. As a result, the nation as a whole will
be in a position to engage in international trade with confidence and gain by acquiring new
resources, selling those that are surplus, and leveraging foreign exchange in the capital
markets.
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