Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Please answer the question by computer, so i can see it clearly, thank you!!! A swap line is a loan from a central bank in

Please answer the question by computer, so i can see it clearly, thank you!!!

A swap line is a loan from a central bank in one nation to a central bank in another country, with the recipient countries currency serving as collateral for the period of the loan. In March 2022, the Narodowy Bank Polski (NBP), Poland's central bank, made a 1 billion USD swap line available to the National Bank of Ukraine (NBU), Ukraine's central bank, on the US dollar-hryvnia (UAH) currency pair, to support Ukraine during Russia's invasion. Ukraine's national currency is the UAH. Assume the NBU enters into a deal with Poland to borrow $1 billion (using UAH as collateral) and swap annual interest payments for three years. NBU will return 1 billion USD and receive its pledged collateral after two years. Assume the spot USD/UAH exchange rate is 29.45, and the interest rates in USD and UAH are 0.25 percent and 13%, respectively.

Questions:

1(a) Is NBU a USD asset or a USD liability in this currency swap agreement? Explain.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

American Public School Finance

Authors: William A. Owings, Leslie S. Kaplan

1st Edition

0495807834, 9780495807834

More Books

Students also viewed these Finance questions

Question

Lying on the shelf, Ruby saw the seashell.

Answered: 1 week ago