Answer with full steps

6. An investment banker is considering the issue of a one-year Australian dollar/U.S. dollar currency- option bond. The currency-option bond is to be issued in A$ (A$1,000), and the interest and principal are to be repaid in A$ or US$ at the option of the bondholder. The principal repaid would be either A$1,000 or US$520.83. The current spot exchange rate is A$1.92 per US$. The current one-year market interest rates are 9 percent in A$ and 6 percent in US$. A one- year put option on the A$, with a strike price of A$1.92 per US$, is quoted at 3 U.S. cents; this is an option to sell one A$ for 1/US$1.92. What should be the fair coupon rate set on this currency-option bond, according to market conditions? b. What is the value of the bond if it is issued at a coupon of 3.4 percent? a. 6. An investment banker is considering the issue of a one-year Australian dollar/U.S. dollar currency- option bond. The currency-option bond is to be issued in A$ (A$1,000), and the interest and principal are to be repaid in A$ or US$ at the option of the bondholder. The principal repaid would be either A$1,000 or US$520.83. The current spot exchange rate is A$1.92 per US$. The current one-year market interest rates are 9 percent in A$ and 6 percent in US$. A one- year put option on the A$, with a strike price of A$1.92 per US$, is quoted at 3 U.S. cents; this is an option to sell one A$ for 1/US$1.92. What should be the fair coupon rate set on this currency-option bond, according to market conditions? b. What is the value of the bond if it is issued at a coupon of 3.4 percent? a