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The Swap Position 20 months ago, your institution entered into a three-year cross-currency interest rate swap with a Swedish furniture company. The swap agreement was
The Swap Position 20 months ago, your institution entered into a three-year cross-currency interest rate swap with a Swedish furniture company. The swap agreement was over-the-counter with the following terms: your institution is to pay 3.15% per annum in SEK and receive LIBOR +1.40% per annum in AUD (both rates are semi-annually compounding). Payments are semi-annual and on a notional principal of SEK150 million. The 6-month LIBOR rate and the spot exchange rate at various dates over the last 20 months are shown in the table below: (a) Compute the cash flow paid and received by your financial institution on each payment date of the swap (i.e., at t=0,6,12, and 18 months). The Swap Position 20 months ago, your institution entered into a three-year cross-currency interest rate swap with a Swedish furniture company. The swap agreement was over-the-counter with the following terms: your institution is to pay 3.15% per annum in SEK and receive LIBOR +1.40% per annum in AUD (both rates are semi-annually compounding). Payments are semi-annual and on a notional principal of SEK150 million. The 6-month LIBOR rate and the spot exchange rate at various dates over the last 20 months are shown in the table below: (a) Compute the cash flow paid and received by your financial institution on each payment date of the swap (i.e., at t=0,6,12, and 18 months)
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