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Australian bank issues a three-year Australian Certificate of Deposit at 3.5 percent ual interest to finance a C$1.5 million (Canadian dollar) investment in two-year, fixed

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Australian bank issues a three-year Australian Certificate of Deposit at 3.5 percent ual interest to finance a C$1.5 million (Canadian dollar) investment in two-year, fixed Canadian bonds selling at par and paying 7 percent annually. The bank is exposed to : einvestment and foreign exchange risks. efinancing, liquidity and credit risks . efinancing, foreign exchange and credit risks. investment, foreign exchange and credit risks. ime the interest rate in the market for one-year zero-coupon government bonds is i - 8% the rate for one-year zero-coupon grade BBB bonds is k - 10.2%. What is the implied ability of repayment on the corporate bond (round to two decimals)? 2.00%. 2.04%. 7.96%. 8.00% Page 2 of 16

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