BARUCH COLLEGE / CUNY Graduate School of Business Administration FIN 4750-QTR / Options Professor R.

Scot Perlin ______________________________________________________________________________________ The R.J. Reynolds International (RJR) Financing Case Study 1. Examine the types of securities being recommended to RJR as financing alternatives in August, 1985. As RJR's treasurer, comment on which specific types of securities you would be considering as well suited to RJR's current liability structure and overall financing program.

debt or equity? if debt what maturities? fixed rate or floating rate? currency match or mismatch? issue in domestic, foreign, or Euromarkets?

2.

What are the all-in costs after hedging of the following six alternatives given the pricing quotes shown in the cases Exhibits 7, 8 and 9?

Eurodollar bond Euroyen bond with yen cash flows hedged into dollars using foreign exchange long dated forward contracts using a currency swap

Dual currency bond with yen cash flows hedged into dollars

using foreign exchange long dated forward contracts using a coupon only currency swap

Dual currency bond with the final dollar principal payment hedged into yen and then all yen cash flows swapped into dollars

3. Assuming that RJR decides to issue a 5-year off-shore bond, which one of the six alternatives listed in 2.) above would you recommend? Defend your recommendation bearing in mind that cost may be only one of several key criteria important to RJR.