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Consider a company that issues a dual-currency bond with a face value of €45 million, which pays...

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Finance

Consider a company that issues a dual-currency bond with a facevalue of €45
million, which pays an interest rate of 3.5 percent a year indollars. Indicate
how the company can manage the risk on this bond issue andcalculate the net cash
flows associated with the transactions. A bond with a face value of€45 million
that pays 5 percent annual interest in euros is available forpurchase. The fixed
rates on a currency swap are 4 percent in dollars and 4.75 percentin euros and
the exchange rate is €1.15/$. (8)

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