Question: Typed solution please 1) Sambuka, Inc can issue bonds in either US dollars or in Pounds Dollar-denominated bonds would have a coupon rate of 7
Typed solution please
1) Sambuka, Inc can issue bonds in either US dollars or in Pounds Dollar-denominated bonds would have a coupon rate of 7 percent; Pound-denominated bonds would have a coupon rate of 6 percent Assume that Sambuka can issue bonds worth $10,000,000 in US dollars or 8 million Pounds, given that the current exchange rate is $125/1 Pound a) If the forecasted exchange rate for the Pound is $130 for each of the next three years what is the annual cost of financing for the pound-denominated bonds? Which type of bond should Sambuka issue? b) If the forecasted exchange rate for the Pound is $120 for each of the next three years what is the annual cost of financing for the pound-denominated bonds? Which type of bond should Sambuka issue
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