Calculate the value of each of the following bond
|
Issuer
|
Face Value
|
Coupon Rate
|
Maturity
|
Bid Yield
|
Bid Price
|
|
Japan
|
100,000,000 ¥
|
4.100 %
|
06/04
|
0.910 %
|
115.3660
|
|
Britain
|
1,000,000 £
|
5.750 %
|
12/09
|
5.200 %
|
104.3800
|
|
U.S.
|
1,000,000 $
|
5.250 %
|
05/04
|
5.740 %
|
97.9375
|
Calculate the value of each of the above bonds in U.S dollars given the following
Spot ($ / ¥) = 0.008422
Spot ($ / £) = 1.596700
SOLUTION:
The FV of Japan Bond = 100,000,000 ¥
Bid price = 115.3660
Hence Value of Bond = 115,366,000 ¥
Spot conversion rate = 0.008422 ($ / ¥)
Hence Value of Japan bond in US $ is = 115,366,000 * 0.008422 = 971,612.5 $
The FV of Britain Bond = 1,000,000 £
Bid price = 104.38
Hence Value of Bond = 1,043,800 £
Spot conversion rate = 1.5967 ($ / £)
Hence Value of Britain bond in US $ is = 1,043,800 * 1.5967 = 1,666,635 $
The FV of US Bond = 1,000,000 $
Bid price = 97.9375
Hence Value of Bond = 979,375 $
Spot conversion rate = 1 ($ / $)
Hence Value of U.S. bond in US $ is = 979,375 * 1.00 = 979,375 $