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How do I approach this? Roo-Fus Inc. took out a EUR 27 million loan to finance its expansions in Europe. However, it prefers to make
How do I approach this?
Roo-Fus Inc. took out a EUR 27 million loan to finance its expansions in Europe. However, it prefers to make its debt payments in AUD and therefore wants to swap into a fixed-rate AUD loan. Westpac quotes the following annualized rates on 5-year currency swaps: AUD: 7.61% bid and 7.88% offered against the 6-month dollar LIBOR EUR: 4.14% bid and 4.49% offered against the 6-month dollar LIBOR If the current EUR/AUD spot rate is 1.69, what are the semi-annual cash flows associated with the debt payments of a EUR 27m swap? You want to swap out of a EUR 27 mil loan and into a fixed-rate AUD loan, and you can ignore the off-setting LIBOR payments. Select one: a. AUD 0.629467 mil payment to Westpac; receive EUR 0.558900 mil payment from Westpac b. receive AUD 0.629467 mil payment from Westpac; EUR 0.558900 mil payment to Westpac C. AUD 1.258935 mil payment to Westpac; receive EUR 1.117800 mil payment from Westpac d. receive AUD 1.258935 mil payment from Westpac; EUR 1.117800 mil payment to Westpac e. AUD 0.607899 mil payment to Westpac; receive EUR 0.558900 mil payment from Westpac X f. receive AUD 0.607899 mil payment from Westpac; EUR 0.606150 mil payment to Westpac g. AUD 0.629467 mil payment to Westpac; receive EUR 0.606150 mil payment from Westpac The correct answer is: AUD 0.629467 mil payment to Westpac; receive EUR 0.558900 mil payment from WestpacStep by Step Solution
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