Problem 1 a 2-year 5 euroyen bond sells at par a comparable, Ask an Expert

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Problem 1: A 2-year, 5% Euroyen bond sells at par. A comparable risk, 2-year yen/dollar dual-currency bond pays ¥6,000 annual coupon and $1,000 at maturity. It sells at ¥105,000. What is the implied ¥/US$ exchange rate at maturity?

Problem 2: On the Tokyo Stock Exchange, Honda Motor Company stock closed at ¥3,619 per share on Feb 28, 2017. Honda trades as an ADR on the NYSE. One underlying Honda share equals one ADR. On Feb 28, 2017, the ¥/US$ exchange rate was ¥113/US$. At this exchange rate, what is the no-arbitrage US$ price of one Honda ADR? By comparison, Honda ADRs traded at US$31.86. Do you think an arbitrage opportunity exists?

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Basic Finance, Finance

Category:- Basic Finance
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