Medecins sans Frontieres has issued a bond that gives the holder the option to cash in the principal as either USD 10,000 or CAD 12,500. This asset can be viewed as a USD 10,000 bond plus a call option on CAD 12.500 at a strike price of 0.80 USD per CAD.

Can the bond also be viewed as a CAD bond plus an option? Explain.

Explain how the two equivalent views are just an application of call-put parity.

Save your time - order a paper!

Get your paper written from scratch within the tight deadline. Our service is a reliable solution to all your troubles. Place an order on any task and we will take care of it. You won’t have to worry about the quality and deadlines

Order Paper Now

The strike price stated as the USD price of the CAD is a natural way of quoting a rate for a U.S. Investor. But buying CAD 12,500 at USD/CAD 0.80 is the same as selling USD 10,000 at a CAD/USD rate of 1.25. This way of expressing the transaction make more sense to an investor from the Great White North. Restate the conditions of the bonds using this CAD/USD strike price and give two possible interpretations of the option from a Dominion dweller’s point of view.

"Looking for a Similar Assignment? Get Expert Help at an Amazing Discount!"