Sambuka, Inc., can issue bonds in either U.S. dollars or in Swiss francs. Dollar-denominated bonds would have

Question:

Sambuka, Inc., can issue bonds in either U.S. dollars or in Swiss francs. Dollar-denominated bonds would have a rate of 15 percent; Swiss franc–denominated bonds would have a rate of 12 percent. Assuming that Sambuka can issue bonds worth $10 million in either currency, that the current of the Swiss franc is $.70, and that the forecasted of the franc in each of the next 3 years is $.75, what is the annual cost of financing for the franc-denominated bonds? Which type of bond should Sambuka issue?

Coupon
A coupon or coupon payment is the annual interest rate paid on a bond, expressed as a percentage of the face value and paid from issue date until maturity. Coupons are usually referred to in terms of the coupon rate (the sum of coupons paid in a... Exchange Rate
The value of one currency for the purpose of conversion to another. Exchange Rate means on any day, for purposes of determining the Dollar Equivalent of any currency other than Dollars, the rate at which such currency may be exchanged into Dollars...