FIN4802_2020: ASSIGNMENT 2 Assignment Due Date: 27 August 2020 Unique number: 731364 QUESTION 1 25 marks a) A U.S. multinational firm, CD Corporation, is considering issuing a Singapore dollar denominated bond at the present coupon rate of 7 percent per annum. It is attracted to the low financing rate, since dollar bonds in the United states would have a coupon rate of 12 percent per annum. Assume that either type of bond would have a four-year maturity and could be issued at par value. CD Corporation needs to borrow $10 million. Therefore, it will either issue dollar bonds with a par value of $10 million or bonds denominated in Singapore dollars with a par value of S$20 million. The spot rate of the Singapore dollar is $0.50. CD Corporation has forecasted the Singapore dollar value at the end of each of the next four years, when coupon payments are to be paid as follows: End of year 1 2 3 4 Exchange rate of S$ $0.52 $0.56 $0.58 $0.53 i. (15) Calculate the expected annual cost (percentage) of financing with Singapore dollars Should CD Corporation issue bonds denominated in US dollars or Singapore bonds (5) b) Assume a U.S. based MNC has $1 000 000 in cash available for 30 days. It can earn 1% on a 30-day investment in the U.S. Alternatively, if it converts the dollars to Mexican pesos, it can earn 1.5% per month on a Mexican deposit. The spot rate of the Mexican peso is $0.12. The spot rate 30 days from now is expected to be $0.10. Should this firm invest its cash in the U.S. or Mexico? Motivate your