Question
70 days ago, the mutual fund entered into a two-year currency swap by agreeing to swap US dollars for euros at the fixed rates. The
70 days ago, the mutual fund entered into a two-year currency swap by agreeing to swap US dollars for euros at the fixed rates. The annualized fixed rate in dollars and euros are 7.25% and 7.1%, respectively. The exchange rate at the start of the swap was $0.78. The new exchange rate today is $0.55. Assume that the notional dollar amount is $25,000,000. The payments are made annually based on the assumption of 30 days per month and 360 days in a year. The adjustment of Current LIBOR and Euribor rates are shown below-
Term | LIBOR (%) | Euribor (%) |
290 days | 7.4 | 5.5 |
650 days | 7.8 | 6.0 |
Determine the market value of the swap today from the counterpartys perspective, which pays euros and receives dollars
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