Yield on zero-coupon bonds

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The yield on zero-coupon bonds are as follows:

U.S.$ % Yen %

1 year    3.00       5.00

2 years   3.50       6.00

A young investment banker considers issuing a bond for ¥100 million. The interest or coupon is paid on year 1 and year 2. What should the interest paid in yen be? What about if the young investment banker considers issuing a bond $/yen dual-currency bond for ¥100 million? A bond $/yen dual-currency bond is a bond with interest paid in yen and principal repaid in dollars. The current spot exchange rate is $1 = ¥100. The bond will be reimbursed for $1 million in two years. The interest is paid on year 1 and year 2. What should the interest paid in yen be?

Reference no: EM131332173

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