Question

g decided to issue three-year bonds denominated in 5 million Russian rubles at par. The bonds have a coupon rate of 17 percent. If the ruble is expected to appreciate from its current level of

Answer 1

Answer:

Assuming that the bonds are sold at par (no discount or premium), the annual coupon payments should be:

year 1 = 850,000 rubles, equal to $27,200

year 2 = 850,000 rubles, equal to $28,900

year 3 = 850,000 rubles, equal to $29,750

plus the face value of 5,000,000 rubles equal to $175,000

The company received 5,000,000 rubles today equal to $150,000

using an excel spreadsheet:

-150,000

27,200

28,900

204,750

and the IRR function, the cost of financing is 23.39%