An MNC Issues Ten-Year Bonds Denominated in 500,000 Philippines Pesos

question 40

Multiple Choice

An MNC issues ten-year bonds denominated in 500,000 Philippines pesos (PHP) at par. The bonds have a coupon rate of 15%. If the peso remains stable at its current level of £0.014 over the lifetime of the bonds and if the MNC holds the bonds until maturity, the financing cost to the MNC will be:

• A) 10.0%.
• B) 12.5%.
• C) 15.0%.
• D) none of the above.

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Definitions:

Decreasing Marginal Utility

The economic principle stating that as a person increases consumption of a product, there is a decline in the marginal utility that person derives from consuming each additional unit of that product.

Redistribution

The process of reallocating income, wealth or resources from certain groups within society to others, often through taxation and welfare systems.

John Stuart Mill

A British philosopher and economist known for his contributions to utilitarianism and political economy.

Utilitarian Justice

A concept in ethics focusing on the greatest good for the greatest number of people as the criterion of justice.