Suppose that the published prices (cents on the dollar) on bank debts of three Latin America countries were quoted as follows: Ecuador 55.45 Colombia 45.60 Nicaragua 70.25 Assume that the central banks of Ecuador, Colombia, and Nicaragua redeemed their debts at 85 percent, 65 percent, and 74 percent, respectively, of face value in a debt-for-equity swap. If the three countries had equal political risk, based purely on financial considerations, the cost of a $30,000,000 manufacturing plant investment in local currency would be ranked (lowest to highest) in dollar cost as follows:
ANSWERS:
Colombia first, Ecuador second, Nicaragua third
Colombia first, Nicaragua second, Ecuador third
Ecuador first, Colombia second, Nicaragua third
Nicaragua first, Ecuador second, Colombia third
