Assume Carlton enters into a three-year fixed-for-fixed swap agreement to receive Swiss Franc and pay U.S. dollar annually, on a notional amount of $6,000,000. The spot exchange rate at the time of the swap is SF0.8/$. Assume that one year into the swap agreement Carlton decides it wishes to unwind the swap agreement and settle it in dollars. Assuming that a two-year fixed rate of interest on the Swiss franc is now 2.59%, and a two-year fixed rate of interest on the dollar is now 5.90%, and the spot rate of exchange is now SF0.85/$, what is the net present value of the swap agreement? Who pays whom what? Euro- Swiss franc U.S. dollar Japanese yen Bid Ask Years Bid Ask Bid Ask Bid Ask 2 3.08 3.12 1.68 1.76 5.43 5.46 0.45 0.49 3 3.25 3.29 2.12 2.17 5.54 5.59 6.56 0.59 Select one: a. The NPV of the Swap to Carlton is $314,399.11. The dealer pays Carlton the amount of NPV. b. The NPV of the Swap to Carlton is -$314,399.11. Carlton pays the dealer the amount of NPV. C. The NPV of the Swap to Carlton is $369,881.31. The dealer pays Carlton the amount of NPV. d. The NPV of the Swap to Carlton is -$369,881.31. Carlton pays the dealer the amount of NPV. e. The NPV is zero. No one pays. Trident the same U.S.-based company discussed in this chapter, has concluded a second larger sale of telecommunications equipment to Regency (U.K.). Total payment of 2,000,000 is due in 90 days. Given the following exchange rates and interest rates, which of the following statements about option hedge is correct? Value 2,000,000.00 $1.5610 $1.5421 4.000% 6.000% 4.500% 8.000% Assumptions 90-day A/R in pounds Spot rate, US$ per pound ($/) 90-day forward rate, US$ per pound ($/L) 3-month U.S. dollar investment rate 3-month U.S. dollar borrowing rate 3-month UK investment interest rate 3-month UK borrowing interest rate Put options on the British pound: Strike rates, US$/pound ($/) Strike rate ($/) Put option premium Strike rate (S/E) Put option premium Strike rate ($/L) Call option premium Trident's WACC Maria Gonzalez's expected spot rate in 90 days, US$ per pound ($/E) $1.55 1.500% $1.54 1.000% $1.55 2.500% 9.000% $1,5431 Select one: Buy put options of 2,000,000 with strike of $1.55/ and receive a (net) minimum of $3,052,116.33 at end of 90 days. Sell put options of 2,000,000 with strike of $1.54/and receive a (net) minimum of $3,048,077.55 at end of 90 days. Buy put options of 2,000,000 with strike of $1,54/ and receive a (net) minimum of $3,052,116.33 at end of 90 days. Buy put options of 2,000,000 with strike of $1.55/ and receive a (net) minimum of $3,048,077.55 at end of 90 days. Sell put options of 2,000,000 with strike of $1.55/ and receive a (net) minimum of $3,052,116.33 at end of 90 days
