Explain dual currency bond, Financial Management

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Explain Dual Currency Bond

A dual currency bond is a straight fixed-rate bond that is issued in one currency and pays coupon interest in that similar currency.  At maturity, the principal is again paid in a second currency.  Coupon interest is often at a higher rate as compared to comparable straight fixed-rate bonds.  The amount of the dollar major repayment at maturity is set at inception; often, the amount permits for some appreciation in the exchange rate of the stronger currency.  From the investor's viewpoint, a dual currency bond involves a long-term forward contract.


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