A five-year, 4 percent Euroyen bond sells at par. A comparable risk five-year, 5.5percent yen/dollar dual-currency bond pays $833.44 at maturity. It sells for¥110,000. What is the implied ¥/$ exchange rate at maturity? Hint: The dual-currency bond pays 5.5 percent on a notional value of ¥100,000, whereas the parvalue of the bond is not necessarily equivalent to ¥100,000.

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Answered: A five-year, 4 percent Euroyen bond…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Similar questions

Medecins sans Frontieres has issued a bond that gives the holder the option to cash in the principal as either USD 10,000 or CAD 12,500. This asset can be viewed as a USD 10,000 bond plus a call option on CAD 12.500 at a strike price of 0.80 USD per CAD. Can the bond also be viewed as a CAD bond plus an option? Explain. Explain how the two equivalent views are just an application of call-put parity. The strike price stated as the USD price of the CAD is a natural way of quoting a rate for a U.S. Investor. But buying CAD 12,500 at USD/CAD 0.80 is the same as selling USD 10,000 at a CAD/USD rate of 1.25. This way of expressing the transaction make more sense to an investor from the Great White North. Restate the conditions of the bonds using this CAD/USD strike price and give two possible interpretations of the option from a Dominion dweller’s point of view.
A bond that pays interest semiannually has a price of $981.73 and a semiannual coupon payment of $27.75. If the par value is $1,000, what is the current yield?
Will the bond proceeds always be less than the face amount of the bonds when the contract rate is less than the market rate of interest? Yes or No 5. Compute the price of $42,309,236 received for the bonds by using the present value tables in Appendix A. Round your PV values to 5 decimal places and the final answers to the nearest dollar. Your total may vary slightly from the price given due to rounding differences. Present value of the face amount Present value of the semiannual interest payments Price received for the bonds
A BBB-rated corporate bond has a yield to maturity of 9.6%. A U.S. Treasury security has a yield to maturity of 8.1%. These yields are quoted as APRs with semiannual compounding. Both bonds pay semi-annual coupons at a rate of 9.0% and have five years to maturity. a. What is the price (expressed as a percentage of the face value) of the Treasury bond? b. What is the price (expressed as a percentage of the face value) of the BBB-rated corporate bond? c. What is the credit spread on the BBB bonds?
A 1-year corporate bond will pay the following: 1. The promised amount of $10,000, with probability 70%. 2. only $9,000 with probability 29%; and 3. nothing with probability 1% 1) If the risk-free market interest rate is 5%, what minimum promised interest rate must the lender demand just to break even , 2) Then, what would be the default premium on this bond under a risk-neutral world. 3) If the bond, however, has a promised rate of return of 11%, what is the risk premium on this bond under a risk-averse world
A UK government bond has exactly three years to maturity. The bond makes semi-annual coupon payments of £2.50 and has a par value of £100. What is the price of the bond if the semi - annual yield to maturity on the bond is 1.75%? a. £102.50 b. £100.00 c. £95.00 d. £103.00 e. £104.25
The taltola bond has a duration of 2.87 years and Beltola bond has Tk.1,000 par value, 3years to maturity , and an 8 percent yield paying semiannual interests at 10 percent. The current yield curve represents an inverted trend indicating decline in future interest rates. Under these circumstances, you have to decide which bond you have to invest in. Calculate the duration of Beltota bond and tell us which bond you will invest in and why.
A 7 year annual payment bond with a 4.18% coupon rate is trading on the east coast at a price of $102.3 per $100 of par value. The same bond is trading on the west coast at a YTM of 3.79%. What is the size of the arbitrage opportunity available per $100 of par value? Assume no transaction costs.
Suppose you (U.S. investor) purchase a 5-year, AA-rated Euro bond for par that is paying an annual coupon at the rate equal to 8 percent. The bond has a face value of 1,000 Euros. The spot exchange rate at the time of purchase is USD1.15/EUR. At the end of the year 1, the bond is upgraded to AAA-rated and the yield changes to 7.5% per annum continuous compounding. In addition due to changes in macroeconomic environment, the exchange rate also changed to USD1.25/EUR. Assume that a U.S. investor holds this bond for one year and sells it in the market at the end of year 1. EUR is the abbreviation for Euro and USD is the abbreviation for U.S. dollar. What is the overall gain / loss in U.S. dollars for the U.S. investor at the end of year 1 (t = 1 year)? (Roundoff your answer to four decimal places, in order to get as accurate answer as possible on Canvas. If your answer is -$1.2345, loss of $1.2345, then type your answer as -1.2345.)
Assume that the yield-to maturity on a straight € fixed-rate bond is 4%. A comparable risk five-year, 5.5 percent euro/dollar dual-currency bond pays $1,500 at maturity per €1,000 of face value. It sells for €1,250. What is the implied $/€ exchange rate at maturity?
Even though most corporate bonds in the United States make coupon payments semiannually, bonds issued elsewhere often have annual coupon payments. Suppose a German company issues a bond with a par value of €1,000, 7 years to maturity, and a coupon rate of 7.3 percent paid annually. If the YTM is 9.3 percent, what is the current bond price in euros? Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16. hond price
A BBB-rated corporate bond has a yield to maturity of 7.4%. A U.S. Treasury security has a yield to maturity of 5.7%. These yields are quoted as APRs with semiannual compounding. Both bonds pay semi-annual coupons at a rate of 6.1% and have five years to maturity. a. What is the price (expressed as a percentage of the face value) of the Treasury bond? b. What is the price (expressed as a percentage of the face value) of the BBB-rated corporate bond? c. What is the credit spread on the BBB bonds? *round to three decimal places*

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