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

question 7

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; the pound-based yield to maturity is i_£ = 4%.

• A)$927.77
• B)$941.30
• C)$965.06
• D)$880.65

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