Author Question: Suppose you are considering the purchase of a bond issued in another country. What calculations must ... (Read 39 times)

lindiwe · **on:** Jun 30, 2018

Suppose you are considering the purchase of a bond issued in another country. What calculations must you do to calculate the expected return on a foreign bond? Explain.

What will be an ideal response?

Question 2

Since approximately 1970, the most stable Phillips-type relationship for the United States has been between which of the following?

A) the rate of inflation and the change in the unemployment rate
B) the unemployment rate and the change in the rate of inflation
C) the change in the unemployment rate and the change in the rate of inflation
D) the inverse of the unemployment rate and the rate of inflation
E) the unemployment rate and the rate of inflation

Hdosisshsbshs · **Reply #1 on:** Jun 30, 2018

Answer to Question 1

You must first determine the amount of foreign currency you can obtain with one unit of domestic currency (E). You then must determine how much foreign currency you will obtain in one year after purchasing foreign bonds. And finally, you must then calculate how much domestic currency you will receive in one year when you convert the foreign currency back to domestic currency.

Answer to Question 2

B