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Japanese investors purchased from Walt Disney Productions projected yen royalties The 20 year stream of royalties is for Tokyo Disneyland The present value of that stream of royalties discounted at

Japanese investors purchased from Walt Disney Productions projected yen royalties. The 20-year stream of royalties is for Tokyo Disneyland. The present value of that stream of royalties, discounted at 5 percent (the return required by the Japanese investors), was ¥95 billion. Disney took the yen proceeds from the sale, converted them to dollars, and invested the dollars in bonds yielding 8 percent. At the time of the sale, the exchange rate was ¥79.8408 = $1.

a. What amount (in dollars) did Disney realize from the sale of its yen proceeds?

b. Describe the similarities and differences between Walt Disney's transaction and a currency/interest rate swap.

Aug 28 2020 View more View Less

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