Current USD Interest rates are 7% per annum and AUD rates are 9% per annum, flat for all terms. Current value of AUD is 0.62 USD. Under a FX swap agreement, a financial institution pays 8% per annum in AUD and receives 4% per annum in USD. Notional principals are 12 Million USD and 20 Million AUD. Payments are exchanged every year, with one exchange having just taken place. The swap will last 5 more years. What is the value of the swap to the financial institution?
Current USD Interest rates are 7% per annum and AUD rates are 9% per annum, flat for all terms. Current value of AUD is 0.62 USD. Under a FX swap agreement, a financial institution pays 8% per annum in AUD and receives 4% per annum in USD. Notional principals are 12 Million USD and 20 Million AUD. Payments are exchanged every year, with one exchange having just taken place. The swap will last 5 more years. What is the value of the swap to the financial institution?
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
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Current USD Interest rates are 7% per annum and AUD rates are 9% per annum, flat for all terms. Current value of AUD is 0.62 USD. Under a FX swap agreement, a financial institution pays 8% per annum in AUD and receives 4% per annum in USD. Notional principals are 12 Million USD and 20 Million AUD. Payments are exchanged every year, with one exchange having just taken place. The swap will last 5 more years. What is the value of the swap to the financial institution?
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