Question
A currency swap has a remaining life of 15 months. It involves exchanging interest at 10% on 20 million for interest at 6% on $30
A currency swap has a remaining life of 15 months. It involves exchanging interest at 10% on 20 million for interest at 6% on $30 million once a year. The term structure of risk-free interest rates in the United Kingdom is flat at 7% and the term structure of risk- free interest rates in the United States is flat at 4% (both with continuous compounding). For the sake of this question, assume the current exchange rate (dollars per pound sterling) is 1.5500.
What is the value of the GBP bond
What is the value of the USD bond
What is the value of the swap to the party paying $ and receiving ?
What is the value of the swap to the party receiving $ and paying ?
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Inside Company Valuation
Authors: Angelo Corelli
1st Edition
3319537822, 9783319537825
