Question
6. Factors affecting international bond prices Suppose you invested in a bond that has a par value of 3,333,333.3333 British pounds, a coupon rate of
6. Factors affecting international bond prices Suppose you invested in a bond that has a par value of 3,333,333.3333 British pounds, a coupon rate of 10 percent (with payments being made at the end of each year), and four years until its maturity. Also suppose that the value of the pound is currently $1.50. For each of the scenarios, calculate the forecasted cash flows for years 1, 2, 3, and 4. (Hint: Do not round intermediate calculations. Round your final answers to the nearest whole dollar value.)
| Scenario I (Stable Pound) | Year 1 | Year 2 | Year 3 | Year 4 |
|---|---|---|---|---|
| Forecasted value of the pound | $1.50 | $1.50 | $1.50 | $1.50 |
| Forecasted dollar cash flows |
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| Scenario II (Weak Pound) | Year 1 | Year 2 | Year 3 | Year 4 |
|---|---|---|---|---|
| Forecasted value of the pound | $1.48 | $1.46 | $1.44 | $1.40 |
| Forecasted dollar cash flows |
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| Scenario III (Strong Pound) | Year 1 | Year 2 | Year 3 | Year 4 |
|---|---|---|---|---|
| Forecasted value of the pound | $1.52 | $1.55 | $1.58 | $1.61 |
| Forecasted dollar cash flows |
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Based on your calculations, the least attractive foreign bonds are those that are denominated in a currency which over time.
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The Management Audit How To Create An Effective Management Team
Authors: Michael Craig-Cooper, Philippe De Backer
1st Edition
0273600044, 978-0273600046
