5. You are a U.S. investor considering purchase of one of the following securities. Assume that the currency risk of the Canadian government bond will be hedged, and the 6-month discount on Canadian dollar forward contracts is - .75% versus the U.S. dollar.

Bond Maturity Coupon Price U.S. government 6 months 6.50% 100.00 Canadian government 6 months 7.50% 100.00 Calculate the expected price change required in the Canadian government bond that would result in the two bonds having equal total returns in U.S. dollars over a 6-month horizon. Assume that the yield on the U.S. bond is expected to remain unchanged.