CH012 Problem 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 par value of the bond is not necessarily equivalent to ¥100,000. (PVIFA4%,5=4.4518, PVIF4%,5=0.8219)

CH012 Problem 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 par value of the bond is not necessarily equivalent to ¥100,000. (PVIFA4%,5=4.4518, PVIF4%,5=0.8219)

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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A five-year, 6.5 percent Euroyen bond sells at par. A comparable risk five-year, 8.0 percent yen/dollar dual-currency bond pays $838.33 at maturity. It sells for ¥110,000. What is the implied ¥/$ exchange rate at maturity? Hint: The dual-currency bond pays 8.0 percent on a notional value of ¥100,000, whereas the par value of the bond is not necessarily equivalent to ¥100,000. (Do not round intermediate calculations. Round your answer to 3 decimal places.)
A five-year, 9.0 percent Euroyen bond sells at par. A comparable risk five-year, 10.5 percent yen per dollar dual currency bond pays $ 843.33 at maturity. It sells for ¥110,000. What is the implied ¥ per $ exchange rate at maturity? Hint: The dual-currency bond pays 10.5 percent interest on a notional value of ¥100,000, whereas the par value of the bond is not necessarily equivalent to ¥100,000.
B 2. Consider 12% USD/GBP dual-currency bonds that pay $1,800 at maturity per GBP1,000 of par value. If it sells at par, what is the implicit USD/GBP (USD for one unit of GBP) exchange rate at maturity?
An investor invested in a 4-years, 4 percent EuroLBP bond sells at par. A comparable risk 4 years, 5.5 percent LBP/dollar dual currency bond pays $666.66 at maturity per LBP1,000,000 of face value. It sells for 1,200,000. Required: Calculate the implied LBP/$ exchange rate at maturity.
Q6. A financial institution has borrowed a one-year $20 million Eurodollar deposit at an annual interest rate of 1.5 percent. It has invested these proceeds in one-year Euro (€) bonds at an annual rate of 2.5 percent after converting them at the current spot rate of €1.22/$. Both interest and principal are paid at the end of the year. What is the spread earned by the bank at the end of the year if the exchange rate remains at €1.22/$? a) 1.50 percent b) 2.50 percent c) 0.50 percent d) 1 percent e) 2.00 percent
Ay 3. Suppose that in 2025, one- and two-year interest rates are 6.4% in the United States and 1.9% in Japan. The spot exchange rate is USD/JPY = 120.06. Suppose that one year later, interest rates are 3% in both countries, while the value of the yen has appreciated to USD/JPY = 114.80. A) Benjamin Pinkerton from New York invested in a U.S. two-year zero-coupon bond at the start of the period and sold it after one year. What was his return? B) Madame Butterfly from Nagasaki bought some dollars. She also invested in the two-year U.S. zero-coupon bond and sold it after one year. What was her return in yen? C) Suppose that Ms. Butterfly had correctly forecasted the price at which she sold her bond and that she hedged her investment against currency risk. What would have been her return in yen? Note: For all requirements, do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.
T cooperation 17 percent coupon rate semiannual payment $1000 par value bonds which mature in 20 years. The bond currently sells for $1230.51 in the market. What is the yield to maturity a. 13.62 b. 13.6 c. 6.8 b. 6.81
Question 4: Chapter 1 On 1 October 20X3, Shanghai issued $10 million convertible loan notes which carry a coupon rate of 5% per annum. The loan notes are redeemable on 30 September 20X6 at par for cash or can be exchanged for equity shares. A similar loan note, without the conversion option, would have required Shanghai to pay an interest rate of 8%. (1) What is the amount that will be recognized as finance costs for the year ended 30 September 20X4. (2) What is the amount that should be shown under liabilities at 30 Sep 20X4. (3) How much would be recorded in equity in relation to the loan notes? Show your workings and round your answers to 2 decimals.
A3) Finance A three-month forward contract exists on a zero-coupon corporate bond with a current price per £100 nominal of £42.60. The yield available on three-month government securities is 6% pa effective. Calculate the forward price.
D6 Assume you own a 2-year US Treasury Note with a 5% coupon and a 7-year US Treasury Note with a 0% coupon. If market interest rates decrease by 100 basis points in the 2-year maturity and declined by only 75 basis points in the 7-year maturity, which bond would experience the smallest market value change? a. 5% US Treasury due in 2 years b. 0% US Treasury due in 7 years c. Both would change by the same amount d. Prices would not change since the coupons are fixed
Q3) The Omani Company has two bond issues outstanding. Both bonds pay OMR (100) annual interest plus OMR (1000) face value at maturity. Bond L has a maturity of 15 years, sell after three years issued, and Bond S has a maturity of 1 year. What will be the value of each of these bonds when the going rate of market interest is 12%? what can you conclude from the results of the above questions regarding the bond risks?
10 year US Treasury spot cash price $10210 year US Treasury yield to maturity 2.25%Risk free rate 0.75%10 year CBOT US Treasury Note Futures Price 90 days $101.5You are a fixed income warrior....you see the above information....what trade can youput on to arbitrage the relationship...how much per million notional would you profit?Assume the 10 year US Treasury is the deliverable security under the contract

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