Calculate the value of bonds, Financial Accounting

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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 $


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