Response to the following problem:
Risk from Issuing Foreign Currency Denominated Bonds
What is the advantage of using simulation to assess the bond financing position?
Exchange Rate Effects
a. Explain the difference in the cost of financing with foreign currencies during a strong-dollar period versus a weak-dollar period for a U.S. firm.
b. Explain how a U.S.-based MNC issuing bonds denominated in euros may be able to offset a portion of its exchange rate risk.