Question
A Chilean company needing US dollars (Company A) enters into a 3-year currency swap with a US company needing Chilean Pesos (Company B). Company A
A Chilean company needing US dollars (Company A) enters into a 3-year currency swap with a US company needing Chilean Pesos (Company B). Company A agrees to swap 1 billion Chilean pesos in exchange for $29,111,624.
a. If each agrees to a fixed rate of 5% annual rate with annual payments indicate the payments that each will make (if any), the timing of the payment, and the currency of the payment.
b. If instead Bustamante agrees to a fixed rate of 6% in dollars and Brown Industries agrees to pay 7% in Chilean pesos, both annual rates and annual payments. Indicate the transactions that each will make (if any), the timing of the payments, and the currency of the payments.
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