Issue bonds in either u.s. dollars or in canadian dollars

Assignment Help Financial Management

Reference no: EM131479347

Apple Computer can issue bonds in either U.S. dollars (USD) or in Canadian dollars (CAD). US Dollar-denominated bonds would have a coupon rate of 15 percent; Canadian dollar-denominated bonds would have a coupon rate of 12 percent. Assume that Apple can issue bonds worth $10,000,000 (USD) or an equivalent amount in CAD at the current exchange rate. Also assume that the current exchange rate of the Canadian dollar is $.80, and that the forecasted exchange rate of the Canadian dollar in each of the next three years is $.81, $.82 and $.83, what is Apple’s annual US dollar cost of financing for the Canadian dollar-denominated bonds? Which type of bond should Apple issue? (Note: Apple will have to convert USD to CAD every year to make the payments on the Canadian bonds. Draw the timeline in CAD, determine the USD payments for each time period and use the CF registers in your calculator with IRR function to find the effective US dollar yield of the Canadian bonds.) DRAW A TIMELINE

Reference no: EM131479347

Questions Cloud

Calculate the present value of the associated profit : If the monopolist makes no sales in first period, what price does it set in period 2? Calculate present value (from the first period) of the associated profit.

Thoreau quote at the top of the mini-lecture : After reviewing our reading, what do you think of the Thoreau quote at the top of the mini-lecture ? Do you think legislation hurts, helps or hurts and helps tr

Recommend to the calculation of the carrying cost : What changes would you recommend to the calculation of the carrying cost i?

Statements is true regarding initiating price cuts : Which of the following statements is true regarding initiating price cuts?

Issue bonds in either u.s. dollars or in canadian dollars : Apple Computer can issue bonds in either U.S. dollars (USD) or in Canadian dollars (CAD).

What is nnual financing cost of these bonds in us dollars : General Automobile Corp. has decided to issue three-year foreign bonds in Japan, what is the annual financing cost of these bonds in US dollars?

Effective annual financing rate from borrowing euros : what is the effective annual financing rate from borrowing Euros?

Binomial model- futures contract : What is the price of a 9-month American put on this futures contract if the strike is $5300?

If the variability of replenishment time increases : If the variability of replenishment time increases, inventory needed to maintain the same fill rate:

User Account

All Pages