Ans To The Question No-03 One Strategy - VC Fund May Cash Out If The Company Is Acquired by Another Firm, Since The Acquirer Will

K. M.
Fazle Rabbi- 19020097
Ans to the question no- 03
One strategy- VC fund may cash out if the company is acquired by another firm, since the acquirer will
purchase the shares owned by the VC fund. Thus, the VC fund commonly serves as a bridge for financing
the business until it either goes public or is acquired.
Another common exit strategy is to sell its equity stake to the public after the business engages in a
public stock offering. Many VC funds sell their shares of the businesses in which they invest during the
first 6 to 24 months after the business goes public.
The characteristics that differentiate one ond from the other onds are given below:
A. Treasury Bond: Treasury bonds are government debt securities issued by the U.S. Federal
government that have maturities greater than 20 years
1. Fixed-rate U.S. government debt securities with a maturity range between 10 and 30 years.
2. Pays semiannual interest payments until maturity.
3. Along with Treasury bills, Treasury notes, and Treasury Inflation-Protected Securities, Treasury bonds
are one of four virtually risk-free government-issued securities.
B. Fedral agency Bond: An agency bond is a security issued by a government-sponsored enterprise or by

a federal government department other than the U.S. Treasury
1. Federal government agency bonds and government-sponsored enterprise bonds pay slightly higher
interest than U.S. Treasury bonds.
2. Most, but not all, are exempt from state and local taxes.
3. Like any bonds, they have interest rate risks.
C. Municipal Bond: A municipal bond is a debt security issued by a state, municipality or county to
finance its capital expenditures, including the construction of highways, bridges or schools.
1. Municipal bonds are debt securities issued by state and local governments.
2. These can be thought of as loans that investors make to local governments, and are used to fund
public works such as parks, libraries, bridges and other infrastructure.
3. Interest paid on municipal bonds is often tax-free, making them an attractive investment.
D. Corporate Bond: A corporate bond is a type of debt security that is issued by a firm and sold to
investors.
1. A corporate bond is debt issued by a company in order for it to raise capital.
2. An investor who buys a corporate bond is effectively lending money to the company in return for a
series of interest payment.
3. The highest qualit bonds are commonly referred to as "Triple-A" bonds, while the least creditworthy
are termed "junk".
Initial public offerings have received negative publicity because of several abuses. Some of the more
common abuses are described here.
A. Spinning: Spinning occurs when the underwriter allocates shares from an IPO to corporate executives
who may be considering an IPO or to another business requiring the help of a securities firm. The
underwriter hopes that the executives will remember the favor and hire the securities firm in the future.
B. Laddering:ladering encourages brokers encourage investors to place first-day bids for the shares that
are above the offer price. This helps to build upward price momentum. Some investors may be willing to
participate to ensure that the broker will reserve some shares of the next hot IPO for them.
C. Excessive Commission: Some brokers have charged excessive commissions when demand was high
for an IPO. Investors were willing to pay the price because they could normally recover the cost from the
return on the first day. Because the underwriter set an offer price significantly below the market price
that would occur by the end of the first day of trading, investors were willing to accommodate the
brokers.
D. Distorted Financial Statements: Prior to an IPO, a firm must disclose financial statements to
summarize its revenue, expenses, and financial condition. Many investors use this information to derive
a valuation of the firm, which can be used to determine a value per share based on the firm’s number of
shares. With this information, investors can decide whether the offer price of shares at the time of the
IPO is below or above their own valuation, which will dictate whether they purchase shares.
Answer to the question no- 02
A. Compared with other instruments, commercial paper offers several advantages, as listed below:
B. Provide more liquidity to the market. Sellers are flexible in the amounts and terms . They can also
adjust the amounts sold based on their changing financing needs
C. Safer than others although commercial papers can only be issued by corporations with very high
credit rating. Also characterized by high credit ratings, and they are backed by receivables at the same
time.
D. Provides extra protection to investors. Isolate the collateral assets from the risk of bankruptcy of the
asset sellers. Credit enhancement and liquidity providers will also provide funds to pay investors in
certain circumstances, depending on their contract terms.

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K. M.

Fazle Rabbi- 19020097

Ans to the question no- 03

2. Pays semiannual interest payments until maturity.

B. Fedral agency Bond: An agency bond is a security issued by a government-sponsored enterprise or by

3. Like any bonds, they have interest rate risks.

1. A corporate bond is debt issued by a company in order for it to raise capital.

Ans to the question no- 04

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