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Coca-Cola wishes to
raise $1 b. The
company can issue
dollars or pounds
denominated bonds.
Dollars (billions) Pounds (billions)
Initial amount raised 1 1/S($)
n n
Principal payment [1+r($)] [1+r(pounds)] /S
Coca-Cola will float the pound bond only if:
[1+r($)]n > E[S] [1+r(pounds)]n /S