Sambuka, Inc. can issue bonds in either U.S. dollars or in Swiss francs.
- Dollar-denominated bonds would have a coupon rate of 15 percent;
- Swiss franc-denominated bonds would have a coupon rate of 12 percent.
1. Assuming that Sambuka can issue bonds worth $10,000,000 in either currency, that the current exchange rate of the Swiss franc is $.70, and that the forecasted exchange rate of the franc in each of the next three years is $.75, what is the annual cost of financing for the franc-denominated bonds?
- Dollar-denominated bonds would have a coupon rate of 15 percent;
- Swiss franc-denominated bonds would have a coupon rate of 12 percent.
1. Assuming that Sambuka can issue bonds worth $10,000,000 in either currency, that the current exchange rate of the Swiss franc is $.70, and that the forecasted exchange rate of the franc in each of the next three years is $.75, what is the annual cost of financing for the franc-denominated bonds?