Assume Ganado enters into a swap agreement to receive euros and pay Japanese yen, on a notional principal of 5,000,000. The spot exchange rate at the time of the swap is 104/. (When you answer the question, please ignore the currency symbols. Just the numbers with no decimal points.)

22, 23. Calculate all principal and interest payments, in both euros and Japanese yen, for the life of the swap agreement. (the answer should be cash flows, not the interest rate.) You need to determine which interest rate (between bid and ask) you receive and pay. Then answer year 3 cash flows Ganado receives (Question 22) and year 3 cash flows Ganado pays (Question 23, should be amount of yen, not interest rates).

Assumptions

Values

Swap Rates

3- year bid

3-year ask

Notional principal

5,000,000

Euros --

3.24%

3.28%

Spot exchange rate, Yen/euro

104.00

Japanese yen

0.56%

0.59%

a) Interest & Swap Payments

Year 0

Year 1

Year 2

Year 3

Receive fixed rate euros at this rate:

On a notional principal of:

5,000,000

Ganado will receive cash flows:

Question 22

Exchange rate, time of swap (/)

104.00

Ganado will pay cash flows:

On a notional principal of (yen):

520,000,000

Pay fixed rate Japanese yen at this rate:

Question 23