A five-year, 4 percent Euroyen bond sells at par. A comparable risk five-year, 5.5 percent yen/dollar dual-currency bond pays $833.33 at maturity per ¥100,000 of face value. It sells for ¥110,000. What is the implied ¥/$ exchange rate at maturity?

Question

Quizplus · Accepted Answer

The dual-currency bond pays $833.33 at maturity for ¥100,000 face value. The implied exchange rate is ¥100,000 / $833.33 = ¥120/$1.00.

A Five-Year, 4 Percent Euroyen Bond Sells at Par