Question
Company A is based in Japan and has a subsidiary in the US that requires funding in USD. It decides to enter into a currency
Company A is based in Japan and has a subsidiary in the US that requires funding in USD. It decides to enter into a currency swap agreement with company B in US. Company A will pay 3% interest on a Yen principal of 100,000,000 and receive 4% on a US$ principal of $1,000,000 every year for the next 3 years. The current exchange rate is 100 Yen per USD. Questions:
a) Whats the cash flow exchanges for company A at the beginning of the swap?
b) Whats the cash flow exchanges for company A in the first year?
c) What are the potential advantages for company A in this swap?
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Managerial Accounting
Authors: Ray Garrison, Eric Noreen, Peter Brewer
16th edition
1259307417, 978-1260153132, 1260153134, 978-1259307416
