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Homework answers / question archive / Darbin, Inc can issue 3-year bonds in either U

Darbin, Inc can issue 3-year bonds in either U

Business

Darbin, Inc can issue 3-year bonds in either U.S. dollars or in Canadian dollars(C$). U.S. dollar-denominated bonds would have a coupon rate of 9 percent; Canadian dollar-denominated bonds would have a coupon rate of 8 percent. Darbin can issue bonds worth $5,000,000 in either currency. The current exchange rate of the C$ is $.74 and the forecasted exchange rate of the C$ in each of the next 3 years is $.75

 

Calculate the annual cost of financing for the C$-denominated bonds

Which type of bond should the company issue? Why?

Option 1

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