The CEO considers the investment in South Africa by entering into an agreement with Electo Co. to expand the existing plant by investing ZAR120, 000,000. The CEO believes MidTech should borrow the funds in US$ at a fixed rate from a bank in the U.S.A. and convert it into ZAR for investment. For this purpose a 5 year (60 month) currency swap transaction will be required. He wants to be provided with a 5 year currency swap proposal. Also depict the swap graphically for the CEO to see how the swap will work. Relevant information, that you will require are provided below:

Given

Exchange rates:	Spot
	Bid	Ask
$/JPY	0.0094	0.0095
$/Won	0.0006	0.0008
$/CAD	0.7614	0.7616
$/GBP	1.3034	1.3038
$/AU$	0.7225	0.7226
$/ZAR	0.0606	0.0607

Current borrowing interest rates on loans:	Fixed	Libor
USA	0.640%	0.130%
Japan	0.525%	0.015%
South Korea	1.164%	0.654%
Canada	0.666%	0.156%
UK	0.577%	0.067%
Australia	0.612%	0.102%
South Africa	5.045%	4.535%

Questions and Workings:

	Show the figures that should be applied in this column	Marks
ZAR to be invested:		1 mark
Spot exchange rate to purchase ZAR for investment:		1 mark
Borrowing rate in U.S.A. to be used:		1 mark
Value in US$ to be borrowed:		1 mark

BANK CURRENCY SWAP INTEREST RATE QUOTES AGAINST U.S. LIBOR RATE $ Yen Won CAD$ GBP AU$ ZAR Years Bid% Ask% Bid% Ask% Bid% Ask% Bid% Ask% Bid%Ask% Bid% Ask% Bid% Ask% 1 0.630 0.650 0.515 0.535 1.154 1.174 0.656 0.676 0.567 0.587 0.602 0.622 5.035 5.055 2 0.640 0.660 0.525 0.545 1.164 1.184 0.666 0.686 0.577 0.597 0.612 0.632 5.045 5.065 3 0.650 0.670 0.535 0.555 1.174 1.194 0.676 0.696 0.587 0.607 0.622 0.642 5.055 5.075 4 0.660 0.680 0.545 0.565 1.184 1.204 0.686 0.706 0.597 0.617 0.632 0.652 5.065 5.085 5 0.670 0.690 0.555 0.575 1.194 1.214 0.696 0.716 0.607 0.627 0.642 0.662 5.075 5.095 6 0.680 0.700 0.565 0.585 1.204 1.224 0.706 0.726 0.617 0.637 0.652 0.672 5.0855.105 7 0.690 0.710 0.575 0.595 1.214 1.234 0.716 0.736 0.627 0.647 0.662 0.682 5.095 5.115 8 0.700 0.720 0.585 0.605 1.224 1.244 0.726 0.746 0.637 0.657 0.672 0.692 5.105 5.125 9 0.710 0.730 0.595 0.615 1.234 1.254 0.736 0.756 0.647 0.667 0.682 0.702 5.115 5.135 10 0.720 0.740 0.605 0.625 1.244 1.264 0.746 0.766 0.657 0.677 0.692 0.712 5.125 5.145 Other summarised information: United Kingdom subsidiary profits generated quarterly: Estimated 30% share profit in South African plant per month: Capital cost of new electric tool plant in South Africa: Capital cost of expanding existing plant in South Africa to electronic component manufacturing and electric tool manufacturing: 500,000 R2,000,000 R150,000,000 R120,000,000 Swap transaction: Marks In which currency is the swap payment? e.g. in US$ or ZAR State whether the payment is Fixed or Libor State the percentage (%) of the payment MidTech pays swap bank MidTech pays swap bank MidTech receives from swap bank MidTech receives from swap bank 1 mark 1 mark 1 mark 1 mark BANK CURRENCY SWAP INTEREST RATE QUOTES AGAINST U.S. LIBOR RATE $ Yen Won CAD$ GBP AU$ ZAR Years Bid% Ask% Bid% Ask% Bid% Ask% Bid% Ask% Bid%Ask% Bid% Ask% Bid% Ask% 1 0.630 0.650 0.515 0.535 1.154 1.174 0.656 0.676 0.567 0.587 0.602 0.622 5.035 5.055 2 0.640 0.660 0.525 0.545 1.164 1.184 0.666 0.686 0.577 0.597 0.612 0.632 5.045 5.065 3 0.650 0.670 0.535 0.555 1.174 1.194 0.676 0.696 0.587 0.607 0.622 0.642 5.055 5.075 4 0.660 0.680 0.545 0.565 1.184 1.204 0.686 0.706 0.597 0.617 0.632 0.652 5.065 5.085 5 0.670 0.690 0.555 0.575 1.194 1.214 0.696 0.716 0.607 0.627 0.642 0.662 5.075 5.095 6 0.680 0.700 0.565 0.585 1.204 1.224 0.706 0.726 0.617 0.637 0.652 0.672 5.0855.105 7 0.690 0.710 0.575 0.595 1.214 1.234 0.716 0.736 0.627 0.647 0.662 0.682 5.095 5.115 8 0.700 0.720 0.585 0.605 1.224 1.244 0.726 0.746 0.637 0.657 0.672 0.692 5.105 5.125 9 0.710 0.730 0.595 0.615 1.234 1.254 0.736 0.756 0.647 0.667 0.682 0.702 5.115 5.135 10 0.720 0.740 0.605 0.625 1.244 1.264 0.746 0.766 0.657 0.677 0.692 0.712 5.125 5.145 Other summarised information: United Kingdom subsidiary profits generated quarterly: Estimated 30% share profit in South African plant per month: Capital cost of new electric tool plant in South Africa: Capital cost of expanding existing plant in South Africa to electronic component manufacturing and electric tool manufacturing: 500,000 R2,000,000 R150,000,000 R120,000,000 Swap transaction: Marks In which currency is the swap payment? e.g. in US$ or ZAR State whether the payment is Fixed or Libor State the percentage (%) of the payment MidTech pays swap bank MidTech pays swap bank MidTech receives from swap bank MidTech receives from swap bank 1 mark 1 mark 1 mark 1 mark