Question: Problem 3. Suppose that the return on dollar bonds is Ks-: 6%, the present exchange rate is S(0)-1.42 dollars to a pound, and the forward

Problem 3. Suppose that the return on dollar bonds is Ks-:

Problem 3. Suppose that the return on dollar bonds is Ks-: 6%, the present exchange rate is S(0)-1.42 dollars to a pound, and the forward rate for delivery date T-1 is F 1.50 dollars to a pound. How much a sterling bond cost today if it is promises to pay 100 at time T 1

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