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PLEASE HELP ME WITH THIS QUESTION It is January 1st, 2022. A bank has five more years remaining in a currency swap according to which
PLEASE HELP ME WITH THIS QUESTION
It is January 1st, 2022. A bank has five more years remaining in a currency swap according to which it receives interest at the end of each year at an effective annual rate of 2.4% on a USD20,000,000 principal and pays interest at the end of each year at an effective annual rate of 2.6% on a CAD25,000,000 principal. The current USDCAD exchange rate is 1.25, compute the value of this currency swap for the bank based on the risk-free zero yields given below in continuously compounded form.
1YEAR | 2YEAR | 3YEAR | 4YEAR | 5YEAR | |
USD | 2.00% | 2.50% | 2.60% | 2.65% | 2.70% |
CAD | 2.50% | 2.55% | 2.55% | 2.60% | 2.65% |
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