Question

10

Investor B entered into a non-mark-to-market cross currency basis swap in which the investor exchanges the USD for EUR with the basis desk. Using the information provided below, calculate the cash flow payment for the EUR leg at the end of the third quarter.

Notional: 6,000,000 EUR

EUR/USD Basis Spread: -0.25%

Tenor: 1 year

Payments: Quarterly (assume 90 days in each period)

	Initiation	Q1	Q2	Q3
EUR/USD Spot	1.42	1.40	1.35	1.37
3-month EURIBOR	0.70%	0.68%	0.69%	0.71%
3-month LIBOR	0.45%	0.41%	0.39%	0.40%

Review Later

€2,100

€6,600

€2,500

€6,900

Answer 1