Problem 2: International bond markets (4 points) Use Bloomberg to find all necessary data.

a) (1 point) On April 29, 2014 a U.S. based investor bought a U.K. government 5 year zero- coupon bond with the principal of GBP 1,000. If the investor sold the bond exactly in 2 years on April 29, 2016 what is the holding period return (in percentages) for this U.S. based investor?

b) (1 point) Was the exchange rate risk realization favorable for the investor in a)?

c) (2 points) On April 29, 2014 a U.S. based investor bought a U.K. government 5 year zero- coupon bond with the principal of GBP 1,000. The investor knew that she will sell the bond in 2 years on April 29, 2016 and on April 29, 2014 she entered the forward contract to exchange the currency (GBP for USD) on April 29, 2016. What is the holding period return (in percentages) for this U.S. based investor?