Notes denominated in yen () are available in increments of 125,000, while baht-denominated notes are issued in
Question:
Notes denominated in yen () are available
in increments of 125,000, while baht-denominated
notes are issued in increments of 50,000 baht. Since the
baht-denominated notes are issued in increments
of 50,000 baht (THB), Blades needs to issue THB434,
782,609/50,000 8,696 baht-denominated notes. Furthermore,
since the current exchange rate of the yen in
baht is THB0.347826/, Blades needs to obtain THB434,
782,609/THB0.347826 1,250,000,313. Since yen-denominated
notes would be issued in increments of
125,000 yen, Blades would have to issue 1,250,000,313/
125,000 10,000 yen-denominated notes.
ANNUAL % CHANGE IN YEN
(AGAINST THE BAHT) PROBABILITY
0% 20%
2 50
3 30
Construct a spreadsheet to determine the annual effective financing percentage cost of the yen-denominated notes issued in each of the three scenarios for the future value of the yen. What is the probability that the financing cost of issuing yen-denominated notes is lower than the cost of issuing baht-denominated notes?
Expert Answer:
To determine the annual effective financing percentage cost of the yendenominated notes issued in ea... View the full answer
