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 $4,000,000. The spot exchange rate at the time of the swap is SFO.8/$. 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 SFO.0.893/$. To Carlton, what is the net present value (in dollar) of the swap agreement? (Keep the sign and two decimal places.)

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
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Chapter1: Investments: Background And Issues
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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 $4,000,000. The spot exchange rate at the time of the swap is
SFO.8/$. 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 SFO.0.893/$. To Carlton, what is the net
present value (in dollar) of the swap agreement? (Keep the sign and
two decimal places.)
Years Bid
2
Euro-€
3
Swiss franc
U.S. dollar
3.08 3.12 1.68 1.76
Japanese yen
Ask Bid Ask Bid Ask Bid Ask
5.43 5.46 0.45 0.49
3.25 3.29 2.12 2.17 5.54 5.59 0.56 0.59
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 $4,000,000. The spot exchange rate at the time of the swap is SFO.8/$. 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 SFO.0.893/$. To Carlton, what is the net present value (in dollar) of the swap agreement? (Keep the sign and two decimal places.) Years Bid 2 Euro-€ 3 Swiss franc U.S. dollar 3.08 3.12 1.68 1.76 Japanese yen Ask Bid Ask Bid Ask Bid Ask 5.43 5.46 0.45 0.49 3.25 3.29 2.12 2.17 5.54 5.59 0.56 0.59
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