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Q6. a) Given the following information, please estimate the price of the currency swap. An US firm agrees to sells a Yen Bond at 3%

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Q6. a) Given the following information, please estimate the price of the currency swap. An US firm agrees to sells a Yen Bond at 3% to a Japanese firm and purchases an USD bond at 6% from the Japanese firm. Yen interest rate: 1% (continuous compounded) USD interest rate: 2% (continuous compounded) Yield curve is flat Notional principal: $10 million Yen 1.200 million USD/Yen: 118 in Yen (or 1/118 in USD) Term: 5 years. b) If the US firm would like to receive $0.5 million upfront in the swap, what should be the coupon rate on the Japanese Yen bond? Q6. a) Given the following information, please estimate the price of the currency swap. An US firm agrees to sells a Yen Bond at 3% to a Japanese firm and purchases an USD bond at 6% from the Japanese firm. Yen interest rate: 1% (continuous compounded) USD interest rate: 2% (continuous compounded) Yield curve is flat Notional principal: $10 million Yen 1.200 million USD/Yen: 118 in Yen (or 1/118 in USD) Term: 5 years. b) If the US firm would like to receive $0.5 million upfront in the swap, what should be the coupon rate on the Japanese Yen bond

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