A three year dual currency bond that pays annual coupons of 50 NZD and a principal value of 1000 AUD at maturity has a present value of NZD 1250. The one, two and three year yield to maturity on otherwise equivalent NZD zero coupon bonds are 2%, 3% and 4% respectively. What is the three year F(NZD/AUD) forward rate implied by these cash flows, prices and yields?

Answer rating: 100% (QA)

First lets break down the given information about the dual currency bond and calculate its cash flow... View the full answer