Finance

What is the different?

Based on the historical rates (Exhibit7), the LIBOR is almost higher than the 3-month US T-Bill. The management team of IBM to increase the debt, comparing with the last few month bond issue, offers and interesting argument but to move forward on the issue would definitely require more information and data. As a intercontinental corporation, it did not provide a stable rate for investors and fund leaders, which would make the company’s reputation deduction. Closely linked to the fixed coupon bond issue that the answer to this question is corporate issuers routinely take advantage of trends in the bond market, and the trend is going to the floating-rate side. In addition, investors never want to buy some bond that locks in very low fixed rate.

What is the rate? What should we compare it with?

Citing information of IBM, the rate are the fixed rate and floating rate. As I found in other resources, unlike homeowner who sought out adjustable-rate mortage financing as the only possible way to afford monthly payment, the companies that are betting on continued low rates aren’t desperate for financing. (Caplinger, 2013) Obviously, in this paragraph, the compare opponent should be the fixed rate like the LIBOR. According to the Exhibit 7, this rate keeps a little higher rate than the T-Bill, which means the rate is based on the T-Bill. The issue rate of IBM is also cited by the LIBOR, which quarterly interest equal to 3-month LIBOR.

Why IBM is raising funds?

Many reasons could lead to raise fund for a company. In the two years later of global financial crisis, IBM was probably need more extra funds for continue the company operation. Investors would be very careful for any investment,the financial problems were also existed in every company. In addition, IBM is raising funds for more capital,maybe for dividends and buybacks.

Caplinger, D. (2013, March 11). Why Corporate America Thinks Rates Will Never Rise. Retrieved September 12,...