Question
Geely, a motor company, plans to raise SKR 10 million (or equivalent in other currencies) to acquire Volvo, a Swedish firm. Therefore, Geely decides to
Geely, a motor company, plans to raise SKR 10 million (or equivalent in other currencies) to acquire Volvo, a Swedish firm. Therefore, Geely decides to issue foreign bonds and has the following two options:
Bond A: 3-year USD coupon bond with face value of US1000; coupon rate = 5% p.a. paid annually; exchange rate = USD 0.09/SKR; yield-to-maturity (YTM) is 6% p.a.
Bond B: 3-year EUR coupon bond with face value of EUR1000; coupon rate = 6% p.a. paid annually; exchange rate = EUR 0.10/SKR; yield-to-maturity (YTM) is 5.5% p.a.
How many bonds should Geely issue if it chooses Bond B? (Please keep zero decimal place. please type in 9 (or 10) in the box if your answer is 9.1 (or 9.6), respectively.)
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