Tsar Alexander III's Russian Gold Loan. The Russian government of Tsar Alexander III issued a 100-year bearer bond in 1894. A bearer bond is a security sold to an investor in which the bearer of the bond, the holder, is entitled to receive an interest payment at regularly scheduled dates as listed on the bond. There is no record kept by any authority of who owns the bond, the bearer is the implicit owner. There is also no record of who receives the coupon payments, if the coupons are redeemed at the recommended banks and cities of the time. This allowed the investor to earn the interest without tax authorities knowing the investor's identity. These tax-free returns allowed the bond issuer, in this case, the Tsar, to raise capital at lower interest rates.

This bond paid interest on a quarterly basis. As noted on the coupon and on the bond itself, there were explicit dates on each individual coupon as to when it could be redeemed. In order for the investor to redeem their coupons for cash payment, the bond contained a sheet of coupons which were numbered and dated. These individual coupons were clipped from the sheet and taken to one of the listed banks around the world to receive their interest payment. This bond listed the cities and the amount of the interest payment in local currency terms. The 118th coupon in the series is reproduced here,

.This 118th coupon, which the bearer can present for payment beginning June 18, 1923, indicates what payment the bearer can receive depending on which currency the bearer is receiving payment. This obviously implies a set of fixed exchange rates in effect on the date of issuance (1894). Use the coupon above and the bond is shown here, to answer the following questions.

a. What is the value of the total bond as originally issued in French francs, German marks, British pounds, Dutch florins, and U.S. dollars?

b. Create a chart which shows the fixed rate of exchange implied by the coupon for the six different currencies.

(Click on the icon to import the table into a spreadsheet.) RUSSIAN 4% GOLD LOAN, SIXTH ISSUE, 1894 Talon of the Bond of 187 Rouble 50 Cop. (1/Rouble = 1/15 Imper.) 118th Coupon of the Bond, due 18 June/1 July 1923: in Paris 7 Francs, in Berlin 4 Mark 16 Pf., in London 3 Schill. 6 P., in Amsterdam 2 Flor. 41 C., in New York 97 1/4 Cents. Valid for 10 years. BOND R. 125. of one hundred and twenty five Gold Roubles = 700 Francs = 416 German Marks = 17 Pounds Sterling 11 shill. 11 pence = 241 Dutch Flor. = 97,25 United States Gold Dollars, inscribed into the Great Book of the Public Debt at the Office of the Imperial Commission of the Sinking Fund to Bearer. The Bearer of this Bond is entitled to the amount of one hundred and twenty five Gold Roubles bearing interest at FOUR per cent per annum until its redemption by drawing. This Bond is forever exempt from every present and future Russian Tax whatever. The interest will be paid against the coupons every three months viz: on the 20th March/1st April, 19th June/1st July, 19th September/1st October, 20th December/1st January of each year, at the choice of the Bearer: in ST.-PETERSBURG: in PARIS: in LONDON: in BERLIN: in AMSTERDAM: in NEW-YORK: at the State Bank, in Gold Roubles or Credit Roubles, at the rate of exchange of the day; at the Banque de Paris et des Pays-Bas, at the Crdit Lyonnais, at the Comptoir National d'Escompte de Paris, at the office of the Russian Bank for Foreign Trade and at Mess's Hottingeur & C, in Francs; at the Russian Bank for Foreign Trade (London-branch), in Pounds Sterling; at Mess's Mendelssohn & C, in German Marks; at Messrs Lippmann, Rosenthal & C, in Dutch Florins; at Mess's Baring, Magoun & C, in Gold Dollars. These Bonds will be redeemed at par, within 81 years by drawings by lot, which will take place at the Imperial Commission of the Sinking Fund half yearly, the 20th March/1st April and 19th September/1st October, beginning from 19th September/1st October 1894. To the redemption of this Loan will be applied every half year 0,084281% of the nominal amount of the original issue together with 2% on the amount of the Bonds previously drawn. Up to the 19th December/1st January 1904, the amount allotted for the amortization of this Loan, mentioned at the previous article, shall not be increased, not shall up to the said date be admitted reimbursement or conversion of the whole Loan. The payment of the drawn Bonds will take place on the date of payment of the next following coupon, at the same places and in the same currencies as the coupons. Coupons due after the date of payment of the drawn bonds must remain attached thereto, otherwise the amount of missing coupons will be deducted from the capital upon payment of the Bond. The drawn Bonds of this Loan not presented for payment within 30 years, from the date fixed for their reimbursement falling under prescription, shall be void; coupons not presented within 10 years after their due date will likewise be void through prescription. The Bonds of this Loan bear coupons up to the 19th December 1903/1st January 1904 and a Talon, on presentation of which after the said date new coupon sheets will be delivered, free of charge, for the undrawn Bonds, at the places designated for the payment the coupons. The Bonds of this Loan issued either nomir or on Bearer. The rules for the Bonds, their exchange for Bonds on Bearer and vice-versa are to be approved by the Minister of Finance. We order: 1. to issue 4% Bonds for a nominal amount of one hundred and thirteen millions six hundred thousand (113,600,000) Gold Roubles and to inscribe this issue in the Great Book of the Public Debt under the denomination of Russian Four per cent Gold Loan, 6th issue, 1894; 2 the interest on these bonds to run from the 20th December 1893/1st January 1894 and their amortization to take place (Click on the icon to import the table into a spreadsheet.) RUSSIAN 4% GOLD LOAN, SIXTH ISSUE, 1894 Talon of the Bond of 187 Rouble 50 Cop. (1/Rouble = 1/15 Imper.) 118th Coupon of the Bond, due 18 June/1 July 1923: in Paris 7 Francs, in Berlin 4 Mark 16 Pf., in London 3 Schill. 6 P., in Amsterdam 2 Flor. 41 C., in New York 97 1/4 Cents. Valid for 10 years. BOND R. 125. of one hundred and twenty five Gold Roubles = 700 Francs = 416 German Marks = 17 Pounds Sterling 11 shill. 11 pence = 241 Dutch Flor. = 97,25 United States Gold Dollars, inscribed into the Great Book of the Public Debt at the Office of the Imperial Commission of the Sinking Fund to Bearer. The Bearer of this Bond is entitled to the amount of one hundred and twenty five Gold Roubles bearing interest at FOUR per cent per annum until its redemption by drawing. This Bond is forever exempt from every present and future Russian Tax whatever. The interest will be paid against the coupons every three months viz: on the 20th March/1st April, 19th June/1st July, 19th September/1st October, 20th December/1st January of each year, at the choice of the Bearer: in ST.-PETERSBURG: in PARIS: in LONDON: in BERLIN: in AMSTERDAM: in NEW-YORK: at the State Bank, in Gold Roubles or Credit Roubles, at the rate of exchange of the day; at the Banque de Paris et des Pays-Bas, at the Crdit Lyonnais, at the Comptoir National d'Escompte de Paris, at the office of the Russian Bank for Foreign Trade and at Mess's Hottingeur & C, in Francs; at the Russian Bank for Foreign Trade (London-branch), in Pounds Sterling; at Mess's Mendelssohn & C, in German Marks; at Messrs Lippmann, Rosenthal & C, in Dutch Florins; at Mess's Baring, Magoun & C, in Gold Dollars. These Bonds will be redeemed at par, within 81 years by drawings by lot, which will take place at the Imperial Commission of the Sinking Fund half yearly, the 20th March/1st April and 19th September/1st October, beginning from 19th September/1st October 1894. To the redemption of this Loan will be applied every half year 0,084281% of the nominal amount of the original issue together with 2% on the amount of the Bonds previously drawn. Up to the 19th December/1st January 1904, the amount allotted for the amortization of this Loan, mentioned at the previous article, shall not be increased, not shall up to the said date be admitted reimbursement or conversion of the whole Loan. The payment of the drawn Bonds will take place on the date of payment of the next following coupon, at the same places and in the same currencies as the coupons. Coupons due after the date of payment of the drawn bonds must remain attached thereto, otherwise the amount of missing coupons will be deducted from the capital upon payment of the Bond. The drawn Bonds of this Loan not presented for payment within 30 years, from the date fixed for their reimbursement falling under prescription, shall be void; coupons not presented within 10 years after their due date will likewise be void through prescription. The Bonds of this Loan bear coupons up to the 19th December 1903/1st January 1904 and a Talon, on presentation of which after the said date new coupon sheets will be delivered, free of charge, for the undrawn Bonds, at the places designated for the payment the coupons. The Bonds of this Loan issued either nomir or on Bearer. The rules for the Bonds, their exchange for Bonds on Bearer and vice-versa are to be approved by the Minister of Finance. We order: 1. to issue 4% Bonds for a nominal amount of one hundred and thirteen millions six hundred thousand (113,600,000) Gold Roubles and to inscribe this issue in the Great Book of the Public Debt under the denomination of Russian Four per cent Gold Loan, 6th issue, 1894; 2 the interest on these bonds to run from the 20th December 1893/1st January 1894 and their amortization to take place