ShmoopTube

Where Monty Python meets your 10th grade teacher.

Search Thousands of Shmoop Videos

See All

Finance: What is a Dual Currency Bond? 33 Views

Share It!

Description:

What is a Dual Currency Bond? Multinational corporations often find their books filled with foreign currencies from countries where they have businesses and have established their brand. One way in which they utilize some of these currencies is to enact securities underwriting that allows them to circulate interest payments in a different currency than repayment of principal. These hybrid securities are called Dual Currency Bonds. Due to the added foreign exchange risk to prospective bondholders, interest rates are usually higher than comparable single currency bonds from the same issuer.

Language:

English Language

Subjects:

Transcript

00:00
Finance allah shmoop what is a dual currency bond Well
00:07
a currency duel would be way cooler to bonds One
00:12
dusty road in the wild west a saloon a gal
00:15
and a gun plan retired or called are paid whatever
00:21
they call bonds when they're dead Anyway a duel currency

00:24
bond is a bond where the principal and the interest
00:27
payments are made in different currencies like here's a bond
00:30
whose principal is paid off in u s dollars But
00:33
its interest is paid in euros and yeah whatever currency
00:38
being used for interest payments is called the base currency
00:42
Well why would you the investor of want one of
00:44
these things Well dual currency bonds or subject to exchange
00:48
rate risk In other words you're making a gamble not
00:51
just on an investment but on which way the exchange
00:55
rate will bounce That is if you own something it's
00:58
highly exposed two euros while then you're kind of making
01:01
a bet that the relative to the dollar the euro
01:03
zehr gonna appreciate mohr like the government's printing less of
01:07
them You have less inflation whatever because then if that
01:10
repayment currency appreciates well boom you're more in the money
01:14
Than just the interest you collected And if that currency
01:17
doesn't appreciate well there's always bank robbery is a last 00:01:21.189 --> [endTime] resort dual currency dueling currencies No
Full Transcript