Problem 1 (5 points): A 2-year, 5% Euroyen bond sells at par. A comparable risk, 2-year yen/dollar dual-currency bond pays 6,000 annual coupon and $1,000 at maturity. It sells at 105,000. What is the implied /US$ exchange rate at maturity?

Problem 2 (5 points) On the Tokyo Stock Exchange, Honda Motor Company stock closed at 3,619 per share on Feb 28, 2017. Honda trades as an ADR on the NYSE. One underlying Honda share equals one ADR. On Feb 28, 2017, the /US$ exchange rate was 113/US$. At this exchange rate, what is the no-arbitrage US$ price of one Honda ADR? By comparison, Honda ADRs traded at US$31.86. Do you think an arbitrage opportunity exists?