Question

A 10-year €200.000 mortgage is contracted in swiss francs (CHF) at a fixed interest rate of...

A 10-year €200.000 mortgage is contracted in swiss francs (CHF) at a fixed interest rate of 3% annually to be paid in equal monthly installments (compounded monthly meaning a 3%/12 monthly rate). The initial exchange rate is 1.10 CHF/€. What is the balance in euros at the end of year 4 if the exchange rate fell to 0.9 CHF/€ by that date?

Homework Answers

Answer #1

As the initial exchange rate is 1.10 CHF/euro, thus 200 euro will be 200*1.10 from initial year, the rest calculation is shown as below:

At the end of the 4th year i.e. 247.611 CHS as per 1.10 exchange rate has to be depreciated to 0.9 CHS/ per euro, thus multiplying 247.6119 * 0.9 we get 222.8507 as at the end value of 4th year.

Interest: by multiplying 3% annual interest on mortgage year by year, we get the values in above table.

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