Question
Please solve the following problems: 1. Your firm has just issued five-year floating-rate notes indexed to six-month U.S. dollar LIBOR plus 1/4%. What is the
Please solve the following problems:
1. Your firm has just issued five-year floating-rate notes indexed to six-month U.S. dollar LIBOR plus 1/4%. What is the amount of the first coupon payment your firm will pay per U.S. $1,000 of face value, if six-month LIBOR is currently 7.2%? 2. Consider 8.5 percent Swiss franc/U.S. dollar dual-currency bonds that pay $666.67 at maturity per SF1,000 of par value. It sells at par. What is the implicit SF/$ exchange rate at maturity? Will the investor be better or worse off at maturity if the actual SF/$ exchange rate is SF1.35/$1.00? 3. A five-year, 4 percent Euroyen bond sells at par. A comparable risk five year, 5.5 percent yen/dollar dual currency bond pays $833.33 at maturity. It sells for 110,000. What is the implied /$ exchange rate at maturity? Hint: The dual-currency bond pays 5.5 percent interest on a notional value of 100,000, whereas the par value of the bond is not necessarily equivalent to 100,000.
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