Suppose an investor buys a Taiwanese bond with a face value of NT20,000, which is priced at NT$19,500 and bears a coupon of NT$1,700. At the end of the year, the investor sells the bond at a price of NT$18,030. During the year, the exchange rate goes from NT$1 = U.S.$0.0375 to NT$1 = U.S.$0.042What was the investor's U.S. dollar return on this bond?

Question

Quizplus · Accepted Answer

The investor's return includes the coupon payment and the change in bond price, both converted to USD using the exchange rates. The initial investment in USD is 19,500 * 0.0375, and the final value in USD is (18,030 + 1,700) * 0.042. The percentage return is calculated as [(final value - initial investment) / initial investment] * 100, which results in approximately 14.67%.

Suppose an Investor Buys a Taiwanese Bond with a Face