Identifier: C5T6L2 · Revision: 2026-10-26 · Classification: domestic

Decision and objectives

The practical task is to compare direct Eurobond, domestic debt-fund and currency-cash routes. Make the decision reproducible: name the exposure, time horizon, cash requirement and comparison baseline before selecting a product.

Objectives: Compare direct Eurobond, domestic debt-fund and currency-cash routes; Reconcile dirty price, coupon and base-currency outcome; Choose a route for a foreign-currency cash requirement under early-exit stress.

Prerequisite: C5T6L1; completed Classes 1–4 and the Stock Market School foundation or Forex School foundation. Every example is hypothetical. Prices, dates, rates, fees, contract factors, policies and tax schedules are supplied teaching inputs, not current offers or legal parameters. No live account is needed.

Mechanics

A Turkish-issued Eurobond gives a direct issuer claim in its contractual currency. A domestic debt fund gives units whose portfolio can include multiple foreign-currency bonds and internal derivatives. Currency cash lacks the bond's duration and issuer spread exposure but has its own bank/custody and purchasing-power risks. All routes here are domestic access comparisons, not an early survey of foreign brokerage markets.

Dirty price includes accrued interest and determines cash paid per nominal amount. A coupon is not yield, and a future sale price is not guaranteed by holding a bond. Compare the same investor currency and spending dates; a fund unit price in lira does not mean its underlying risks are lira-only.

Price and return drivers

Direct debt cash = face × dirty price/100 + transaction cost. Ending base-currency wealth converts remaining cash, coupon and actual sale proceeds at their relevant dates. The following one-date end conversion is explicitly assumed to keep the calculation transparent; it is not a rule for tax conversion. Fund performance is supplied after internal expenses.

Worked case

Hypothetical budget TRY 500,000 at TRY 40/USD gives USD 12,500. Each route pays an assumed common USD 20 entry charge, leaving USD 12,480. Direct route buys USD 10,000 face at dirty 103, costing USD 10,300, and retains USD 2,180 cash. After one year coupon USD 600 is paid, bond dirty sale price 102 gives USD 10,200, and custody charge USD 30 leaves total USD 12,950. At final FX42 this is TRY 543,900, net gain TRY 43,900. Domestic debt-fund route invests USD 12,480 equivalent; supplied net unit return 4% gives USD 12,979.20 equivalent, converted at 42 less TRY 50 investor redemption charge = TRY 545,076.40. Currency-cash route earns a supplied2% on USD 12,480, then pays USD 10 account charge: USD 12,719.60 ×42 = TRY 534,223.20. All returns, charges and FX rates are fictional and all tax is excluded.

Adverse case

Under a joint rate/spread and FX shock, direct bond dirty sale85 after the same paid coupon gives USD 8,500+600+2,180−30 = USD 11,250; at FX38 wealth TRY 427,500. The fund's supplied total unit return−10%, already incorporating its differing portfolio income and expenses, gives USD 11,232 ×38−50 = TRY 426,766. Currency cash under its same supplied interest terms ends TRY 483,344.80. These routes are not identical portfolios, so their ranking is scenario-specific. If USD 6,000 is needed at month six before any coupon, direct reserve USD 2,180 is insufficient. With fictional USD 1,000 face trading increments and an executable95 bid, selling USD 4,000 face yields USD 3,800 less USD 10 fee: available USD 5,970, still USD 30 short. Selling USD 5,000 face yields USD 6,920 including reserve, but materially reduces the holding.

Practical use

Obtain actual issuer terms, ISIN, seniority, calls, denomination, clean/dirty convention, custody and dealer depth. For a fund read dated policy, holdings, redemption and internal hedges rather than import direct-bond coupon dates. The common entry charge and fund cash-equivalent units above are comparison assumptions, not quoted offers. Verify actual tax with income year, investor residence/status, lots and effective rules; direct coupons and fund redemptions cannot be assigned one assumed legal rate.

Use permitted domestic access routes and the actual instrument documents. Verify intermediary authority, investor eligibility, order/redemption terms, settlement, custody and executable size before implementation. Reconcile spread and commissions, funding, collateral, custody, product expenses, conversion and exit charges; an amount already embedded in a fill or fund unit price is not deducted again. A published mark or product description does not promise an executable price or liquidity.

Tax is excluded unless a numerical schedule is expressly supplied as hypothetical. For actual rules record income year, residence and individual/corporate status, instrument and acquisition/contract dates, taxable event and rule effective date. The GIB investment-income guide, checked 2026-10-26, covers 2025 individual income; its 2026 publication date alone cannot settle a 2026 liability.

Decision boundaries

Choose according to currency spending, price-loss tolerance, denomination and timing, not coupon size alone. Currency cash may fit a firm near-term dollar need despite a lower normal scenario result. A fund can offer divisibility while retaining duration/spread and redemption risk. Decline direct debt when its minimum sale lot or market access cannot meet the cash need without unacceptable residual exposure.

Practice and references

Exercise: hypothetical USD 5,000 face costs dirty 101, with reserve USD 1,000 and entry fee USD 20. Year-end dirty price is 98, coupon USD 250 and exit fee USD 20; initial FX is 30 and final FX 33 TRY/USD. Calculate initial/final dollar cash and base-currency gain. Solution: initial dollar cash = 5,000 × 1.01 + 1,000 + 20 = USD 6,070. Year-end sale dirty 98 gives USD 4,900, coupon USD 250, reserve USD 1,000, exit fee USD 20: final USD 6,130, gain USD 60. With initial FX 30 and final FX 33, initial TRY 182,100 and ending TRY 202,290 give TRY 20,190 economic gain before tax. This does not imply the same amount is a legally taxable FX component.

Takeaway: Choose a route for a foreign-currency cash requirement under early-exit stress with the cash dates, costs and remaining risks stated.

Product card: portfolio-decision-record. Formula: Domestic foreign-currency route ending wealth. Glossary: Dirty-price cash commitment, Currency spending match. Next lesson: C5T6L3. Topic test.

Sources checked 2026-10-26:

Additional product cards: mutual-fund, direct-eurobond, currency-cash.

Shared reference guide