Question
Gallo Boats can issue either two-year bonds, three-year bonds, four-year bonds, or five-year bonds in Costa Rica with a par value of 50 million Costa
Gallo Boats can issue either two-year bonds, three-year bonds, four-year bonds, or five-year bonds in Costa Rica with a par value of 50 million Costa Rican colones (CRC), a five percent annual coupon rate, and priced at par (100% of par). The forecasted exchange rate is 585 CRC per 1 USD at the end of year one, 605 CRC per 1 USD at the end of year two, 630 CRC per 1 USD at the end of year three, 615 CRC per 1 USD at the end of year four, and 605 CRC per 1 USD at the end of year five. Assume Titan Boats issues the three-year bonds. Calculate the USD cash flows needed each year to cover the bond payments. Explain your answer.
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