Question: Ecolet, 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

Ecolet, 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. Assuming that Sambuka can issue bonds worth $10,000,000 in either currency, that the current exchange rate of the Swiss franc is $.47, and that the forecasted exchange rate of the franc in each of the next three years is $.50.

what is the annual cost of financing for the franc-denominated bonds? Which type of bond should Ecolet issue?

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