Ganado's Cross-Currency Swap: Yen for Euros. Use Year 3 of the table of swap rates, BB, and assume Ganado enters into a swap agreement to receive euros and pay Japanese yen, on a notional principal of 4,500,000. The spot exchange rate at the time of the swap is 106 / . a. Calculate all principal and interest payments, in both euros and Japanese yen, for the life of the swap agreement. b. Assume that one year into the swap agreement Ganado decides it wants to unwind the swap agreement and settle it in euros. Assuming that a 2-year fixed rate of interest on the Japanese yen is now 0.80%, a 2-year fixed rate of interest on the euro is now 3.60%, and the spot rate of exchange is now 116/, what is the net present value of the swap agreement? Who pays whom what? See the inital values on the table: EXHIBIT 8.12 Interest Rate Swap Quotes (December 31, 2014) N Euro Sterling Swiss franc U.S. dollar Japanese yen Years Bid Ask Bid Ask Bid Ask Bid Ask Bid Ask 1 0.14 0.18 0.63 0.66 -0.14 -0.08 0.42 0.45 0.11 0.17 2. 0.16 0.20 0.91 0.95 -0.18 -0.10 0.86 0.89 0.11 0.17 3 0.20 0.24 1.11 1.15 -0.14 -0.06 1.26 1.29 0.13 0.19 4 0.26 0.30 1.28 1.33 -0.07 0.01 1.55 1.58 0.15 0.21 5 0.34 0.38 1.42 1.47 0.02 0.10 1.75 1.78 0.19 0.25 6 0.42 0.46 1.53 1.58 0.11 0.19 1.90 1.93 0.24 0.30 7 0.51 0.55 1.62 1.67 0.21 0.29 2.02 2.05 0.30 0.36 8 0.60 0.64 1.69 1.74 0.30 0.38 2.11 2.10 0.36 0.42 9 0.70 0.74 1.76 1.81 0.39 0.47 2.19 2.22 0.42 0.48 10 0.79 0.83 1.82 1.87 0.47 0.55 2.26 2.29 0.49 0.55 12 0.95 0.99 1.91 1.98 0.59 0.69 2.37 2.40 0.61 0.69 15 1.12 1.16 2.02 2.11 0.75 0.85 2.48 2.51 0.82 0.90 20 1.30 1.34 2.12 2.25 0.95 1.05 2.59 2.62 1.09 1.17 25 1.39 1.43 2.15 2.28 1.06 1.16 2.64 2.67 1.22 1.30 30 1.44 1.48 2.17 2.30 1.11 1.21 2.67 2.70 1.29 1.37 LIBOR Typical presentation by the Financial Times. Bid and ask spreads as of close of London business. US$ is quoted against 3-month LIBOR: Japanese yen against 6-month UBOR: Euro and Swiss franc against 6-month LIBOR. (Click on the icon to import the table into a spreadsheet.) Values 3-Year Ask Assumptioms Notional principal Original spot rate (1) 4,500,000 106 Swap Rates Original: Euro Original: Yen 3-Year Bid 0.20% 0.13% 0.24% 0.19% Ganado's Cross-Currency Swap: Yen for Euros. Use Year 3 of the table of swap rates, BB, and assume Ganado enters into a swap agreement to receive euros and pay Japanese yen, on a notional principal of 4,500,000. The spot exchange rate at the time of the swap is 106 / . a. Calculate all principal and interest payments, in both euros and Japanese yen, for the life of the swap agreement. b. Assume that one year into the swap agreement Ganado decides it wants to unwind the swap agreement and settle it in euros. Assuming that a 2-year fixed rate of interest on the Japanese yen is now 0.80%, a 2-year fixed rate of interest on the euro is now 3.60%, and the spot rate of exchange is now 116/, what is the net present value of the swap agreement? Who pays whom what? See the inital values on the table: EXHIBIT 8.12 Interest Rate Swap Quotes (December 31, 2014) N Euro Sterling Swiss franc U.S. dollar Japanese yen Years Bid Ask Bid Ask Bid Ask Bid Ask Bid Ask 1 0.14 0.18 0.63 0.66 -0.14 -0.08 0.42 0.45 0.11 0.17 2. 0.16 0.20 0.91 0.95 -0.18 -0.10 0.86 0.89 0.11 0.17 3 0.20 0.24 1.11 1.15 -0.14 -0.06 1.26 1.29 0.13 0.19 4 0.26 0.30 1.28 1.33 -0.07 0.01 1.55 1.58 0.15 0.21 5 0.34 0.38 1.42 1.47 0.02 0.10 1.75 1.78 0.19 0.25 6 0.42 0.46 1.53 1.58 0.11 0.19 1.90 1.93 0.24 0.30 7 0.51 0.55 1.62 1.67 0.21 0.29 2.02 2.05 0.30 0.36 8 0.60 0.64 1.69 1.74 0.30 0.38 2.11 2.10 0.36 0.42 9 0.70 0.74 1.76 1.81 0.39 0.47 2.19 2.22 0.42 0.48 10 0.79 0.83 1.82 1.87 0.47 0.55 2.26 2.29 0.49 0.55 12 0.95 0.99 1.91 1.98 0.59 0.69 2.37 2.40 0.61 0.69 15 1.12 1.16 2.02 2.11 0.75 0.85 2.48 2.51 0.82 0.90 20 1.30 1.34 2.12 2.25 0.95 1.05 2.59 2.62 1.09 1.17 25 1.39 1.43 2.15 2.28 1.06 1.16 2.64 2.67 1.22 1.30 30 1.44 1.48 2.17 2.30 1.11 1.21 2.67 2.70 1.29 1.37 LIBOR Typical presentation by the Financial Times. Bid and ask spreads as of close of London business. US$ is quoted against 3-month LIBOR: Japanese yen against 6-month UBOR: Euro and Swiss franc against 6-month LIBOR. (Click on the icon to import the table into a spreadsheet.) Values 3-Year Ask Assumptioms Notional principal Original spot rate (1) 4,500,000 106 Swap Rates Original: Euro Original: Yen 3-Year Bid 0.20% 0.13% 0.24% 0.19%