Assume Carlton enters into a three-year fixed - for- fixed swap agreement to receive Swiss Franc and pay U.S. dollar annually, on a notional amount of $3,000,000. The spot exchange rate at the time of the swap is SF0.8/$. Assume that one year into the swap agreement Carlton decides it wishes to unwind the swap agreement and settle it in dollars. Assuming that a two-year fixed rate of interest on the Swiss Franc is now 2.59 %, and a two-year fixed rate of interest on the dollar is now 5.90%, and the spot rate of exchange is now SF0.883/$. To Carlton, what is the net present value (in dollar) of the swap agreement? (Keep the sign and two decimal places.) Table below: Year Euro Swiss franc US Dollar Japanese Yen Bid Ask Bid Ask Bid Ask Bid Ask 2 3.08 3.12 1.68 1.76 5.43 5.46 0.45 0.49 3 3.25 3.29 2.12 2.17 5.54 5.59 0.56 0.59
Assume Carlton enters into a three-year fixed - for- fixed swap agreement to receive Swiss Franc and pay U.S. dollar annually, on a notional amount of $3,000,000. The spot exchange rate at the time of the swap is SF0.8/$. Assume that one year into the swap agreement Carlton decides it wishes to unwind the swap agreement and settle it in dollars. Assuming that a two-year fixed rate of interest on the Swiss Franc is now 2.59 %, and a two-year fixed rate of interest on the dollar is now 5.90%, and the spot rate of exchange is now SF0.883/$. To Carlton, what is the net present value (in dollar) of the swap agreement? (Keep the sign and two decimal places.) Table below: Year Euro Swiss franc US Dollar Japanese Yen Bid Ask Bid Ask Bid Ask Bid Ask 2 3.08 3.12 1.68 1.76 5.43 5.46 0.45 0.49 3 3.25 3.29 2.12 2.17 5.54 5.59 0.56 0.59
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:Assume Carlton enters into a three-year fixed - for- fixed swap agreement to receive Swiss
Franc and pay U.S. dollar annually, on a notional amount of $3,000,000. The spot exchange
rate at the time of the swap is SF0.8/$. Assume that one year into the swap agreement
Carlton decides it wishes to unwind the swap agreement and settle it in dollars. Assuming that
a two-year fixed rate of interest on the Swiss Franc is now 2.59 %, and a two-year fixed rate
of interest on the dollar is now 5.90%, and the spot rate of exchange is now SF0.883/$. To
Carlton, what is the net present value (in dollar) of the swap agreement? (Keep the sign and
two decimal places.)
Table below:
Year Euro Swiss franc US Dollar Japanese Yen
Bid Ask Bid Ask Bid Ask Bid Ask
2
3.08 3.12 1.68 1.76
5.43 5.46
0.45 0.49
3
3.25 3.29 2.12 2.17
5.54 5.59
0.56 0.59
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