1) A US MNC with an A-credit rating wants to borrow $70 million and the YTM on A-rated bonds are 8%. If they issue an 8% coupon bond wha cash flows associated with the bond issue? What is the cost of the debt 2) Suppose the MNC can issue a Euro Bond denominated in Euros and the the Euro debt is 7.5%. If they issue a 7.5% coupon Euro Bond what are the cash flows associated with the bond issue? What is the cost of the debt issue? Assume the following exchange rates: Yr 0 Yr 1 Yr 2 Yr 3 Yr 4 Yr 5 $1.25/Eur $1.25/Eur $1.25/Eur $1.25/Eur $1.25/Eur $1. 3) Assume that the Euro strengthens. If they issue a 7.5% coupon Euro Bond what are the cash flows associated with the bond issue? What is the cost of the debt issue? Assume the following exchange rates: Yr 0 Yr 1 Yr 2 Yr 4 Yr 5 $1.25/Eur $1.32/Eur $1.32/Eur $1.32/Eur $1.32/Eur $1.32/Eur Yr 3 4) Assume that the Euro weakens. If they issue a 7.5% coupon Euro Bond what are the cash flows associated with the bond issue? What is the cost of the debt issue? Assume the following exchange rates: Yro Yri Yra Yr3 Yr 4 Yrs $1.25/Eur $1.19/Eur $1.19/Eur $1.19/Eur $1.19/Eur $1.19/Eur 5) Assume the following FX rates. If they issue a 7.5% coupon Euro Bond what are the cash flows associated with the bond issue? What is the cost of the debt issue? Assume the following exchange rates: Yro Yri Yr 2 Yr 3 Yr 4 Yr 5 $1.25/Eur $1.28/Eur $1.26/Eur $1.18/Eur $1.17/Eur $1.32/Eur D) none of these 4. Lorre Company will receive 200,000 Canadian dollars (C$) in 90 days and is trying to determine whether or not to hedge this position. Lorre has developed the following probability distribution for the Canadian dollar: Possible Value of Canadian Dollar in 90 Days Probability $0.75 15% 0.77 25% IS 4,000 0.80 35% = 160,000 0.83 25% - 166,000 The 90-day forward rate of the Canadian dollar is $.785, If Lorre implements a forward hedge, what is the probability that hedging will be advantageous to the firm? A) 15%. 6) 40%. C) 75%. D) 60%. 200,000x 0.78 15125