Find the Value Today of a 2-Year Dual Currency Bond $\pi$

question 6

Multiple Choice

Find the value today of a 2-year dual currency bond with annual coupons (paid in U.S.dollars at a 5 percent coupon rate) that pays £500 per $1,000 par value at maturity.The cash flows of the bond are:
The dollar-based yield to maturity is i_$ = 3%; the spot exchange rate is $1.80 = £1.00; expected inflation over the next three years is $\pi$ _$ = 2% in the U.S.and $\pi$ _£ = 3% in the U.K.

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