New Hampshire Corp

question 28

Multiple Choice

New Hampshire Corp. has decided to issue three-year bonds denominated in 5,000,000 Russian rubles at par. The bonds have a coupon rate of 17%. If the ruble is expected to appreciate from its current level of $.03 to $.032, $.034, and $.035 in years 1, 2,and 3, respectively, what is the financing cost of these bonds?

• A) 17%.
• B) 23.18%.
• C) 22.36%.
• D) 23.39%.

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Definitions:

Hindsight Bias

The tendency to believe, after learning an outcome, that one would have foreseen it.

Availability Heuristic

A cognitive bias that causes people to overestimate the likelihood of events based on their ability to recall examples more easily.

Confirmation Bias

The habit of looking for, comprehending, selecting, and reminiscing about information that validates an individual's prior convictions or theories.

Hindsight Bias

The tendency to believe, after learning an outcome, that one would have foreseen it, also known as the "knew-it-all-along" effect.