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Consider an Australian financial institution lending to a US financial institution an amount with a present value of 100 USD for each of two contracts.

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Consider an Australian financial institution lending to a US financial institution an amount with a present value of 100 USD for each of two contracts. The maturity of the first lending contract (A) is 1 year and the maturity of the second lending contract (B) is 2 years. There are no intermediary interest payments, so both bonds are zero coupon bonds. The interest rate in the US is 5%. Consider an Australian financial institution lending to a US financial institution an amount with a present value of 100 USD for each of two contracts. The maturity of the first lending contract (A) is 1 year and the maturity of the second lending contract (B) is 2 years. There are no intermediary interest payments, so both bonds are zero coupon bonds. The interest rate in the US is 5%

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