6. Factors affecting international bond prices Suppose you invested in a bond that has a...
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6. Factors affecting international bond prices Suppose you invested in a bond that has a par value of 2,000,000 British pounds, a coupon rate of 5 percent (with payments being made at the end of each year), and four years until its maturity. Also suppose that the value of the pound is currently $1.50. For each of the scenarios, calculate the forecasted cash flows for years 1, 2, 3, and 4. (Hint: Do not round intermediate calculations. Round your final answers to the nearest whole dollar value.) Year 1 Year 2 Year 3 Year 4 Scenario I (Stable Pound) Forecasted value of the pound Forecasted dollar cash flows $1.50 $1.50 $1.50 $1.50 $ Year 1 Year 2 Year 3 Year 4 Scenario II (Weak Pound) Forecasted value of the pound Forecasted dollar cash flows $1.48 $1.46 $1.44 $1.40 $ $ $ Year 1 Year 2 Year 3 Year 4 Scenario III (Strong Pound) Forecasted value of the pound strengthens bilar cash flows $1.52 $1.55 $1.58 $1.61 $ weakens calculations, the most attractive foreign bonds are those that are denominated in a currency which over time
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