Question
5. The yield curves on the dollar and yen are flat at 8 percent and 4 percent per year, respectively. An investment banker is
5. The yield curves on the dollar and yen are flat at 8 percent and 4 percent per year, respectively. An investment banker is considering issuing a dollar/yen dual-currency bond for 150 million. This bond would pay the coupons in yen, and the principal would be repaid in dollars. The bond will make a principal payment of $1.36 million in two years, with interest paid in years 1 and 2. The spot exchange rate is 110.29 per $. What should the coupon rate be if the bond is issued at fair market conditions-that is, if the issue price is equal to its theoretical market value? b. . If the actual coupon rate is 6 percent, compute the percentage price.
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Global Investments
Authors: Bruno Solnik, Dennis McLeavey
6th edition
321527704, 978-0321527707
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