A US company wants to raise a large capital by issuing debt in the
international debt markets. It has two alternative proposals made by an
investment bank.
Proposal 1. Issue US dollar denominated debt of 10% annual coupon for 10
years. The bank promises to place the bond to net 98.75% after issue costs.
Proposal 2. Issue yen denominated bond of 8% annual coupon for 10 years.
The current exchange rate is 100 yen per dollar and yen is expected to
appreciate at an annual rate of 5% relative to
j******4 发帖数: 6090
2
自己顶一下，在线等～
s****y 发帖数: 424
3
My answer is: 2nd is better
Return Rate for 1 is 10.2%
Return Rate for 2 is 8.53% + 5% = 13.53%
so, 2nd is better.
