Question

The swap desk at Crédit Lyonnais is quoting the following rates on 5-year swaps:

USD: 8.75% bid, 8.85% ask

CHF: 5.25% bid, 5.35% ask.

You enter a swap to pay CHF and receive USD. The notional principal is $10M, the payments are annual, and the current exchange rate is CHF 1 == USD 1. What are the cashflows?

Answer #1

The relevant rate in USD is bid rate since we will receive USD | = | 8.75% | |||||||

The relevant rate in CHF is ask rate since we will Pay CHF | = | 5.35% | |||||||

Now,since exchange rate between CHF and USD is 1 | |||||||||

We can directly calculate annual cashflow | = | (USD rate-CHF rate)*$10M | |||||||

Annual cashflow | = | (8.75%-5.35%)*$10M | |||||||

Annual cashflow | = | 3.4%*$10M | |||||||

Annual cashflow | = | $0.34 M | |||||||

We will receive USD 0.34 million annually | |||||||||

If you have any doubt,please ask |

Suppose that you have entered a 5-year swap to receive Japanese
Yen and Pay 1-year Libor with notional principal of USD 10,000,000.
At the time the swap agreement was completed the swap quote was
0.50% bid and 0.60% offered against the 1-year dollar Libor, and
the spot rate was JPY100/$ (assume payments are annual). Assume
that 1 year has passed. The spot exchange rate is JPY 98/USD. The
dealer is quoting the following interest rates on 4-year swaps:
1.50% bid...

Currency
Spot quote
Euro (EUR/USD)
1.1278 - 1.1281
British pound (GBP/USD)
1.2845 - 1.2848
Swiss franc (USD/CHF)
1.0020 – 1.0022
Japanese yen (USD/JPY)
110.41 – 110.44
Dominican peso (USD/DOP)
50.540 – 50.600
Part 2. Forward exchange rates
1. If the 3-month forward bid and ask quotes for the British
pound are 15 21, what are the 3-month forward bid and ask exchange
rates?
2. How many US dollars will a customer that enters a 3-month
forward contract to buy £1...

Ganado Corporation entered into a 3-year cross-currency
interest rate swap to receive U.S. dollars and pay Swiss francs.
Ganado, however, decided to unwind the swap after one year—thereby
having two years left on the settlement costs of unwinding the swap
after one year. Repeat the calculations for unwinding, but assume
that the following rates now apply:
Assumptions
Values
Swap Rates
3-Year Bid
3-Year Ask
Notional principal
$11,000,000
Original: US dollar
5.56%
5.59%
Original spot rate (SFr/$)
1.5
Original: Swiss franc...

19) Current interest rates are
i$=4%;i€=6%. Expected interest rates next
year are: i$=7%;i€=3%. Expected spot rate in
two years is S2($/€)=1.09. Use the asset market approach
to compute the current spot rate S0($/€). Please just type in the
number without the currency signs. For example, if your answer is
$1.25/€, then type in 1.25 as your final answer. Please
keep at least 2 decimal numbers (up to 5 decimal numbers).
18) Assume Carlton enters into a three-year fixed-for-fixed swap
agreement to...

You entered into a currency swap that has 4.25 years left until
termination. You receive 4.3% on $10,000,000 (annual rate with
annual compounding) and pay 3.8% on €9,600,000 each settlement
date. Current exchange rate is $1.10/€1. The interest rates are
listed below for the USD and EUR all quoted per annum with
continuous compounding. What is the value of your swap today?
Year USD EUR
0.25 3.00% 3.50%
1.25 3.50% 4.00%
2.25 4.00% 4.00%
3.25 4.25% 4.50%
4.25 4.25% 4.75%

Q.11 Consider a one year currency swap with
quarterly payments. The domestic currency is the U.S dollar and the
foreign currency is the Euro. The current exchange rate is $0.86
per euro.
Calculate the annualized fixed rates for dollars and euros. The
current U.S term structure is the same as in problem 9, Part
A.
Lo(90)= 0.0656
Lo(180)= 0.0640
Lo(270)= 0.0621
Lo((360)= 0.0599
The Euribor term structure is
Lo^euro(90)= 0.0682
Lo^euro(180)= 0.0673
Lo^euro(270)=0.0661
Lo^euro(360)=0.0668
Now move forward 30 days. The...

(a) Prawn and Lobster are two companies that
can borrow for a five year term at the following rates.
Prawn
Lobster
International credit rating
A
B
Fixed-rate borrowing cost
6.5%
10.5%
Floating-rate borrowing cost
LIBOR + 1%
LIBOR + 3%
(i) Calculate the quality spread differential
(QSD).
Enter your answer as a percentage to 2 decimal places, e.g.
1.23 (1 Mark)
Answer %
(ii) Develop an interest-rate swap in which
both Prawn and Lobster have an equal cost savings in...

Please review the following below and provide , one-page
reaction to this budget proposal.
1. Budget
The President’s Budget and Health Care
While the president’s budget is not likely to be acted upon by
Congress, it does signal what the administration’s priorities
are—as well as what policy initiatives they might push.
Repeal the Affordable Care Act: The administration’s
budget includes a plan that is based upon the plan put forward by
Sens. Lindsey Graham (R-SC) and Bill Cassidy (R-LA) last...

Please read the article and answear about
questions.
Determining the Value of the Business
After you have completed a thorough and exacting investigation,
you need to analyze all the infor- mation you have gathered. This
is the time to consult with your business, financial, and legal
advis- ers to arrive at an estimate of the value of the business.
Outside advisers are impartial and are more likely to see the bad
things about the business than are you. You should...

ADVERTISEMENT

Get Answers For Free

Most questions answered within 1 hours.

ADVERTISEMENT

asked 4 minutes ago

asked 11 minutes ago

asked 11 minutes ago

asked 32 minutes ago

asked 36 minutes ago

asked 38 minutes ago

asked 57 minutes ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago