1. USAcorp needs 1,875,000,000 Indian Rupee to set up a new factory in India. USAcorp is unfamiliar with India's financial regulations and is relatively unknown to India's investors so borrowing Rupee direct in India would be difficult at a good rate. The Spot exchange rate is 75 Rupee / $. At Spot exchange rate, the US$ value of the 1.875 Billion India Rupee is $25 million. USAcorp will issue $25 million amount 3-year maturity floating debt in the US at a rate of LIBOR + 1.6, with semi-annual interest payments. 6-month LIBOR is presently 3.4%. USAcorp is worried that the LIBOR rate will rise soon and desires locking in a fixed rate by using a Swap. USAcorp enters into a SWAP with Giga Bank. In the Swap, Giga will pay USAcorp straight LIBOR every 6 months in exchange for USAcorp paying fixed 5.2% annual rate with semi-annual interest payments to Giga. 3pts ea. Enter key answers below (show amount and currency, $ or Rupee, on each answer): 1a. At initial rates, each 6 months, USAcorp pays its US lenders the amount 1A b. At t=0 Day-1 start, Giga pays to USAcorp the initial amount......... 1B C. At current rates, every 6 months (180/360), USAcorp pays Giga 1C d. At current rates, every 6 months, (180/360), Giga pays to USAcorp 1D e. USAcorp each 6 months needs to come up with how much additional $ besides Swap receipts to cover its US debt payments 1E f. The LIBOR rate for the last 6 months of the Swap rose to 4.4%, then the final TOTAL closing swap payment at Swap end t=3 from Giga to USAcorp is 1F g. The final TOTAL closing swap payment at end t=3 from USAcorp to Giga Bk is 1G 1. USAcorp needs 1,875,000,000 Indian Rupee to set up a new factory in India. USAcorp is unfamiliar with India's financial regulations and is relatively unknown to India's investors so borrowing Rupee direct in India would be difficult at a good rate. The Spot exchange rate is 75 Rupee / $. At Spot exchange rate, the US$ value of the 1.875 Billion India Rupee is $25 million. USAcorp will issue $25 million amount 3-year maturity floating debt in the US at a rate of LIBOR + 1.6, with semi-annual interest payments. 6-month LIBOR is presently 3.4%. USAcorp is worried that the LIBOR rate will rise soon and desires locking in a fixed rate by using a Swap. USAcorp enters into a SWAP with Giga Bank. In the Swap, Giga will pay USAcorp straight LIBOR every 6 months in exchange for USAcorp paying fixed 5.2% annual rate with semi-annual interest payments to Giga. 3pts ea. Enter key answers below (show amount and currency, $ or Rupee, on each answer): 1a. At initial rates, each 6 months, USAcorp pays its US lenders the amount 1A b. At t=0 Day-1 start, Giga pays to USAcorp the initial amount......... 1B C. At current rates, every 6 months (180/360), USAcorp pays Giga 1C d. At current rates, every 6 months, (180/360), Giga pays to USAcorp 1D e. USAcorp each 6 months needs to come up with how much additional $ besides Swap receipts to cover its US debt payments 1E f. The LIBOR rate for the last 6 months of the Swap rose to 4.4%, then the final TOTAL closing swap payment at Swap end t=3 from Giga to USAcorp is 1F g. The final TOTAL closing swap payment at end t=3 from USAcorp to Giga Bk is 1G
