currency, Financial Management

You have the following limited information upon which to base your decision as to which is the
better of two alternative funding arrangements:
? Alternative 1 is to arrange funding by using 3.25% YTM, five-year USD Eurocurrency loan with
USD 10,000,000 principal value.
? Alternative 2 is to arrange funding by using a 1.65% YTM, five-year zero-coupon currency option
bond with principal repaid in USD or AUD at USD/AUD 1.05.
? The premium on a five-year currency call option with strike of USD/AUD 1.05 is 0.0375 USD per
AUD
(a) Do Alternatives 1 and 2 provide the same value of payment at maturity? Assume that the
exchange rate is USD/AUD 1.0225 at maturity.
(2 marks)
(b) Is it better to issue USD LIBOR or to issue the currency-option bond hedged with a call option on
AUD?
(2 marks)
Posted Date: 10/16/2012 12:20:12 AM | Location : United States







Related Discussions:- currency, Assignment Help, Ask Question on currency, Get Answer, Expert's Help, currency Discussions

Write discussion on currency
Your posts are moderated
Related Questions
Given that risk-averse investors demand more return for taking on more risk when they invest, how much more return is appropriate for, say, a share of common stock, than is appropr

What is the De-merger This is splitting up of a group into two or more separate bodies. The group is split into separate entities, but the shareholders remain the same. It is o

Preferred Stock This is a category of capital stock that will gives its holders preference  over common stockholders in the distribution  of earnings  or rights to the assets o

Q. Describe the Walters dividend model? Walter's Model: - Walter's model maintains the doctrine that the dividend policy is relevant for the value of the firm. As-per to the Wa

Your firm will produce widgets for the next 10 years (starting at t=1). Annual revenue from selling widgets is $20,000. Production requires an initial outlay (at t=0) for machin

Q. What do you signify by Organisation of Finance Function? Describe the functions of Financial Manager. Ans. Organisation of Finance Function: - Organization of finance functi

fixation of selling price

Q. Major proportion of the maximum financing requirement? Whether the credit terms themselves is able to be changed may depend upon the credit terms of competitors when set alo

Q. What is the function of Dividend policy decision? Dividend policy decision: the third major decision of the financial management of the decision related to the dividend poli

Investment banks and securities firms Investment banks support corporations or governments in the issue of new debt or equity securities. Investment banking comprises Th