1. Typically, a firm has what kind of department that searches for ways of improving existing products or finding new products?
2. Find the value today of a 2-year dual currency bond with annual coupons (paid in U.S. dollars at a 5 percent coupon rate) that pays £500 per $1,000 par value at maturity. The cash flows of the bond are:
Year 0: $0
Year 1: $50
Year 2: $50 + £500
The dollar-based yield to maturity is i$ = 3%; the spot exchange rate is $1.80 = £1.00; expected inflation over the next three years is ?$ = 2% in the U.S. and ?£ = 3% in the U.K.