A Canadian corporation (ACC) has just entered into a two-year currency swap contract with Big Dealer Bank (BDB). The swap contract requires ACC to make semi-annual payments in Canadian dollars (C$) and receive semi-annual payments in U.S. dollars (US$). The notional amount in Canadian dollars is C$25 million. The accrual period for the swap is 180/360, assuming 360 days per year. The US$/C$ spot exchange rate is 0.77, with the Canadian dollar being the domestic currency for ACC. The term structures of C$ LIBOR and US$ LIBOR are as follows: Days C$ LIBOR (%) US$ LIBOR (%) 180 0.50 0.55 360 0.60 0.65 540 0.65 0.75 720 0.70 0.85 a. What is the notional amount in U.S. dollars? b. Calculate the fixed rates in Canadian and U.S. dollars.
A Canadian corporation (ACC) has just entered into a two-year currency swap contract with Big Dealer Bank (BDB). The swap contract requires ACC to make semi-annual payments in Canadian dollars (C$) and receive semi-annual payments in U.S. dollars (US$). The notional amount in Canadian dollars is C$25 million. The accrual period for the swap is 180/360, assuming 360 days per year. The US$/C$ spot exchange rate is 0.77, with the Canadian dollar being the domestic currency for ACC. The term structures of C$ LIBOR and US$ LIBOR are as follows:
|
Days |
C$ LIBOR (%) |
US$ LIBOR (%) |
|
180 |
0.50 |
0.55 |
|
360 |
0.60 |
0.65 |
|
540 |
0.65 |
0.75 |
|
720 |
0.70 |
0.85 |
a. What is the notional amount in U.S. dollars?
b. Calculate the fixed rates in Canadian and U.S. dollars.
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