What will be the total expected foreign exchange gain

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Reference no: EM132049391

On February 26, 2015, an American company, Company A, sold an euro-denominated eight-year bond at a fixed interest rate of 1%. In comparison, a similarly rated company, Company B, sold a bond with the same maturity in the U.S. with a coupon of 2.5%. The exchange rate on February 26, 2015 was $1.1199/€. Assume that the International Fisher Effect holds true. What will be the total expected foreign exchange gain or loss for both the interest payment and the value of the bond (in percentage) for Company A each year in the next eight years?

Reference no: EM132049391

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