Help I need the steps to this questions 1. A U.S. based firm decides to issue a

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Help I need the steps to this questions

1. A U.S. based firm decides to issue a three­year bond denominated in 5,000,000 Russian rubles at par. The bond has a coupon rate of 17%. If the ruble is expected to appreciate from its current level of $.03 to $.032, $.034, and $.035 in years 1, 2,and 3, respectively, what is the financing cost of this bonds in $ terms?

2. A U.S. based firm decides to issue a three­year bond denominated in 5,000,000 Russian rubles at par. The bond has a coupon rate of 17%. If the ruble is expected to depreciate by 2% per year from its current level of $.03 for the next 3 years, what is the financing cost of this bonds in $ terms?

Explanation / Answer

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2.

Bond value in Russian rubles 5000000 $ rate of one Rubel Incremental Incremental cost$ Total Financing cost Current $0.03 Yr 1 $0.03 $0.002 $10,000 $10,000 Yr 2 $0.03 $0.002 $10,000 $20,000 Yr 3 $0.04 $0.001 $5,000 $25,000 Total Financing cost for all 3 years $55,000

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