Assume you have 7,000,000. Would it be advantageous to do aa 9-month currency swap given the following
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Question:
Assume you have 7,000,000. Would it be advantageous to do aa 9-month currency swap given the following information:
- Deposit interest rates on Euro is 3.5%
- Deposit interest rate on US Dollars is 6%
- Spot $/ is 0.9285
- 9-Month $/ is 0.9022
7,000,000 / 0.9285 = $ 7,539,041.46
Deposit at 6% for 270 days to get: $7,878,298.33
Convert to Euro to get 7,107,800
If invest Euro at 3.5% we would have 7,183,750
So loss of: 7,107,800 - 7,183,750 = -75,949.2470
Explain how the underline number is obtain.
Related Book For
Basic Finance An Introduction to Financial Institutions Investments and Management
ISBN: 978-1111820633
10th edition
Authors: Herbert B. Mayo
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