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A zero-coupon British bond promises to pay 100,000 in five years. The current exchange rate is $2.00 = 1.00 and inflation is forecast at 2

A zero-coupon British bond promises to pay 100,000 in five years. The current exchange rate is $2.00 = 1.00 and inflation is forecast at 2 percent in the U.S. and 3 percent in the U.K. per year for the next five years. The appropriate discount rate for a bond of this risk would be 10 percent if it paid in dollars. What is the appropriate price of the bond?

A.

none of the options

B.

59,135.91 = $118,271.83

C.

65,196.13 = $130,392.26

D.

62,092.13 = $124,184.26

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