Question

8)Carlton, an AAA rated corporate, enters an interest rate swap on $1,000,000, paying Libor and receiving a fixed rate of 2.56% annually. The swap is going to last for 4 years. Currently the 4-year Libor is 2.59% on dollars. One year later, Carlton decides to unwind the swap. What is the NPV of the swap if the three-year interest rate(Libor) is 3.02% now? Who pays whom?

Select one:

a.-$13,006.61; Carlton pays dealer

b.$855; Dealer pays Carlton

c.$13,006.61; Dealer pays Carlton

d.-$13,006.61; Dealer pays Carlton

e.-$855; Carlton pays dealer

7)Which one of the following statements is
**correct** about the exchange rates?

Select one:

a.Current interest rates are i_{$}=1% and
i_{€}=3.5% and they will stay constant for many years. We
would expect the Euro to appreciate against dollar according to the
uncovered interest rate parity.

b.The European Central Bank announces to increase interest rate by 0.1%. The market consensus was 0.2% increase before the announcement. Upon the news, we would see euro to appreciate.

c.When the central bank of Australia raises interest rate to a level that is more than all traders expected, i.e. an unexpected rise in interest rate, the Australian dollar will depreciate.

d.A country with high inflation may see its currency to appreciate according to the asset market approach.

d.Price of currency futures(or forwards) will be slightly lower than the spot exchange rate at maturity.

Answer #1

Carlton, an AAA rated corporate, enters an interest rate swap on
$1,000,000, paying Libor and receiving a fixed rate of 2.56%
annually. The swap is going to last for 4 years. Currently the
4-year Libor is 2.59% on dollars. One year later, Carlton decides
to unwind the swap. What is the NPV of the swap if the three-year
interest rate(Libor) is 3.02% now? Who pays whom?
Select one:
-$13,006.61; Carlton pays dealer
-$13,006.61; Dealer pays Carlton
$13,006.61; Dealer pays Carlton...

Carlton, an AAA rated corporate, enters an interest rate swap on
$1,000,000, paying Libor and receiving a fixed rate of 2.56%
annually. The swap is going to last for 4 years. Currently the
4-year Libor is 2.59% on dollars. One year later, Carlton decides
to unwind the swap. What is the NPV of the swap if the three-year
interest rate(Libor) is 3.02% now? Who pays whom? Select one:
$13,006.61; Dealer pays Carlton
-$855; Carlton pays dealer
-$13,006.61; Dealer pays Carlton...

Carlton, an AAA rated corporate, enters an interest rate
swap on $1,000,000, paying Libor and receiving a fixed rate of
2.56% annually. The swap is going to last for 4 years. Currently
the 4-year Libor is 2.59% on dollars. One year later, Carlton
decides to unwind the swap. What is the NPV of the swap if the
three-year interest rate(Libor) is 3.02% now? Who pays
whom?
A -$855; Carlton pays dealer
B -$13,006.61; Dealer pays Carlton
C $13,006.61; Dealer pays...

8) Carlton, an AAA rated corporate, enters an interest rate swap
on $1,000,000, paying Libor and receiving a fixed rate of 2.56%
annually. The swap is going to last for 4 years. Currently the
4-year Libor is 2.59% on dollars. One year later, Carlton decides
to unwind the swap. What is the NPV of the swap if the three-year
interest rate(Libor) is 3.02% now? Who pays whom?
Select one:
a. -$13,006.61; Carlton pays dealer
b. $855; Dealer pays Carlton
c....

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...

In an interest rate swap, ABC financial institution pays 6% per
annum and receives three-month LIBOR in return on a notional
principal of GBP 100 million with payments being exchanged every
three months. The swap has a remaining life of 14 months. The
average of the bid and offer fixed rates currently being swapped
for three- month LIBOR is 8% per annum for all maturities. The
three-month LIBOR rate one month ago was 7.8% per annum. All rates
are compounded...

a. Find the upcoming net payment in a plain vanilla interest
rate swap in which the fixed party pays 10 percent and the floating
rate for the upcoming payment is 9.5 percent. The notional amount
is $20 million and payments are based on the assumption of 180 days
in the payment period and 360 days in a year.
b. The present value of the series of dollar payments in a
currency swap per $1 notional amount is $0.03. The present...

1) Company A and a bank enter a three-year, plain-vanilla
interest rate swap. Company A has floating rate debt based off
LIBOR while the bank pays a fixed rate debt.
Company A agrees to exchange the LIBOR rate for a 10% fixed rate on
$10 million notional amount. LIBOR is currently at
11%. A year later, LIBOR increases to
12%.
Question:
a) Calculate the payments for company A and the bank at end of
one year. Which party will receive...

According to uncovered interest rate parity, if the interest
rate in Japan decreases, all else equal, ________.
Select one:
a. Japanese yen is expected to depreciate against U.S dollar
b. U.S. dollar is expected to depreciate against Japanese
yen
c. the exchange rate of Japanese yen against U.S. dollar remains
unchanged
d. U.S. dollar is expected to appreciate against Japanese
yen
If U.S. residents increased their imports of cheese from
Switzerland, the Swiss central bank would need to ________ in...

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...

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