Bond Financing Analysis: Sambuka, INC., can issue bonds either in US dollars or in Swiss francs.

9. Bond Financing Analysis: Sambuka, INC., can issue bonds either in US dollars or in Swiss francs. Dollar-denominted bonds would have a coupon rate of 15%; Swiss franc-denominated bonds would have a coupon rate of 12%. Assuming that Sambuka can issue bond worth $10 million in either currency, that the current rate of the Swiss franc is $.70, and that the forecasted exchange rate of the franc in each of the next 3 years is $.75, what is the annual cost of financing for the franc-denominated bonds? Which type of bond should Sambuka issue?