Question 1

Assume that XYZ Inc. issued a new bond with the following features:

Par Value=$1,000

Coupon Interest = 5%

Time to Maturity = 10 yrs

The frequency of Coupon Payments: 1

Risk Free Rate of Return=3%

Default Risk Premium for XYZ=4%

How much would you pay for this bond? Use an appropriate Excel function to find the price and clearly explain which function and which inputs (arguments) you used in a particular order.

Question 2

Suppose GE issues $10,000,000,000 par value Eurobonds with a floating rate of LIBOR + 10bp and 10-year maturity. At the time the bond was issued, one year LIBOR rate was 2%. At the time GE made its first interest payment LIBOR increased to 2.5%. Calculate the dollar value of first and second interest payments for GE's Eurobonds.
Question 3

In your last day in Paris you walk into a currency exchange kiosk and you see the following rates:

Bid        -      Offer

$1.1220 -  $1.1350 per EUR

In a Bank Paribas branch office the rates are: 

Bid        -      Offer

$1.1210 -  $1.1352  per EUR

You have EUR300 left in your pocket that you will not need it anymore. Do you exchange your EUROS in the kiosk or in the bank? How much USD do you get in exchange for EUR300?