Explain how a change in the Swiss franc/U.S. dollar exchange rate would affect the returns to bondholders, warrant holders, and bond-cum-warrant holders
What will be an ideal response?
If the value of the Swiss franc rose, the dollar return to the warrant holder and the bond-cum-warrant holder would rise because the dollar value of the Swiss franc warrant payments in 1994 would rise. The bonds are denominated in dollars; therefore, the dollar return would not be affected by changes in the exchange rate.
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Answer the following statement true (T) or false (F)