Annual cost of financing for franc-denominated bonds

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Reference no: EM131067119

ALTEC Inc. can issue bonds in either U.S. dollars or in Swiss francs. Dollar-denominated bonds would have a coupon rate of 15%; Swiss franc–denominated bonds would have a coupon rate of 12%. Assuming that ALTEC can issue bonds worth $10,000,000 in either currency, that the current exchange rate of the Swiss franc is $0.70, and that the forecasted exchange rate of the franc in each of the next 3 years is $0.75, what is the annual cost of financing for the franc-denominated bonds? Which type of bond should ALTEC issue?

Reference no: EM131067119

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