Martha, Inc., a U.S. company is considering issuing a Singapore dollar denominated bond at its present coupon rate of 6 percent, even though it has no incoming cash flows to cover the bond payments.It is attracted to the low financing rate, since U. S. dollar-denominated bonds issued in the United States would have a coupon rate of 10 percent.Assume that either type of bond would have a 4-year maturity and could be issued at par value.Marta needs to borrow $12 million.Therefore, it will either issue U. S. dollar denominated bonds with a par value of $12 million or bonds denominated in Singapore dollars with a par value of S$16 million.The spot rate of the Singapore dollar is $.75.Martha has forecasted the Singapore dollar's value at the end of each of the next four years, when coupon payments are to be paid:

Year 1$0.76

Year 2$0.77

Year 3$0.79

Year 4%0.78

(1)Calculate the expected annual cost (as a percentage) of financing with Singapore dollars.

(2) Should Martha, Inc., issue bonds denominated in U.S. dollars or Singapore dollars?Why?