Question
A US company enters into a currency swap in which pays a fixed rate of 5.5% in euros and the counterparty pays a fixed rate
A US company enters into a currency swap in which pays a fixed rate of 5.5% in euros and the counterparty pays a fixed rate of 6.75% in dollars. The notional principals are $100,000,000 and 116,500,000 million. Payments are made semi-annually and on the basis of 30 days per month and 360 days per year.
a) Calculate the initial exchange of payments that the US company pays to the counterparty.
b) Calculate the final exchange of payments that the US company receives from its counterparty.
c) Calculate the semi-annual payments that the US company receives from its counterparty.
d) For the initial exchange of payments that take place at the beginning of the swap, is the US company paying USD or EURO to the counterparty?
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