Question

1. Suppose the initial price of a French bond is €850, the coupon income is €70, the end of period bond price is €1,000, and the franc devalues by 6% against the dollar during the period. What was the bond's total dollar return during the period?

2. 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.$0.0425. What was the investor's U.S. dollar return on this bond?

3. A Thai baht bond with a coupon of 9.5% is initially priced at its face value of Bt 1,000. At the end of one year, the bond is selling for Bt 1,050. If the initial spot rate was Bt 25 = $1, at what end of year exchange rate will the dollar return on the bond just equal 10%?

4. A Canadian bond is initially priced at its face value of C$1,000. At the end of the year, the bond is selling for C$1,100. If the Canadian dollar appreciates by 10%, with a 5.5% coupon, what will the U.S. dollar return on the bond equal at the end of the year?

5. Hong Kong bond with a coupon of 10% is initially priced at HK$1,000. At the end of the year, the bond is selling for HK$1,200. If the Hong Kong dollar depreciates by 5%, what will the U.S. dollar return on the bond equal at the end of the year?

6. Suppose an investor buys a Japanese bond with a coupon rate of 10% at its price of ¥1,100. The bond’s face value is ¥1,000. At the end of the year, the bond is selling at ¥1,050 and the ¥ has depreciated by 10%. What is the dollar return on the bond at the end of the year?

7. A Euro bond with a coupon rate of 10% is initially priced at its face value of €1000. At the end of the year, the bond is selling at €1,070. If the € appreciates by 12% during the year, what is the end of year dollar return on the bond?

8. A Brazilian bond with a coupon rate of 20% is initially priced at its face value of R$1,000. At the end of the year, the bond is selling at R$1,050. If the real depreciates by 75%, what is the dollar return at the end of the year?

9. A Brazilian bond with a coupon rate of 15% at is initially priced at its face value of R$1,000. At the end of the year, the bond is selling at R$950. During the year, the exchange rate goes from R$1 = U.S. $0.75 to R$1 = U.S.$0.85. What is the bond's total dollar return during the period?

Answer 1

1. Bond's return in € = (70 + 150)/850 = 0.2588235294 = 25.88235294%

If franc devalues by 6%, then the total dollar return is 25.88235294% * (1 - 0.06) = 0.2432941176 = 24.32941176%

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