JV Coffee Co. has issued 3 year, euro-denominated bonds with a face value of 8mm euros. At the time of the bond issued, this was equal to $10mm in USD, the exchange rate at that time was $1.25/euro. The annual interest payments on these bonds is 960,000 euros. What is the average interest rate that JV is paying (based on US dollar payments) if the exchange rate for years 1, 2, and 3 is $1.30?

Don't forget that JV will not only be paying the euro-denominated interest payments every year, but the firm will be repaying the principal of 8mm euros at the end of year 3. 

Options:

	12.8%
	12.0%
	9.6%
	13.6%
	14.7%

Answer rating: 100% (QA)

1200 14 NPV 012 NPV 014 Year Cash flow in EURO Exchange rate Cash flowUSD PV factor PVCash flo... View the full answer