Before-tax rate domestic bond pay to give after-tax return

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Reference no: EM1310447

Q1) If one U.S. dollar purchases 1.64 Canadian dollars, how many U.S. dollars can you buy for one Canadian dollar? Assume 144 yen could be bought in foreign exchange market for 1 U.S. dollar today. If yen depreciates by 8.0% tomorrow, how many yen could one U.S. dollar purchase tomorrow?

Q2) Assume a foreign investor who holds tax-exempt Eurobonds paying 9% is considering investing in the equivalent-risk domestic bond in the country with 28% withholding tax on interest paid to foreigners. If 9% after-tax is investor's required return, what before-tax rate would domestic bond require to pay to give the required after-tax return?

Reference no: EM1310447

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