Question
Consider the following 3-year currency swap, which involves exchanging annual interest of 2.75% on 10 million US dollars for 3.75% on 15million Canadian dollars. The
Consider the following 3-year currency swap, which involves exchanging annual interest of 2.75% on 10 million US dollars for 3.75% on 15million Canadian dollars. The CAD/USD spot rate is 1.52. The term structure is flat in both countries. Calculate the value of the swap in USDif interest rates in Canada is 5% and in the United States are 4%. Assume continuous compounding. Round to the nearest dollar.
B. $145,693
C. $131,967
D. $127,818
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Option C Vswap USD BUSD Spot rate x BCAD ...
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Advanced Accounting
Authors: Joe Hoyle, Thomas Schaefer, Timothy Doupnik
10th edition
0-07-794127-6, 978-0-07-79412, 978-0077431808
