D4) When a 2-year currency swap between U.S. Dollars and Currency X is created, the exchange rate is X1.95/USD and the term structures of interest rates are flat at 3.07% in the U.S. and 2.51% in Country X. The swap has annual payments and a notional principal of $1 million. 17 months later, the exchange rate is X2.19/USD and the term structures of interest rates are flat at 4.1% in the U.S. and 2.8% in Country X. For the party that is paying dollars, what is the present value of this swap?
D4) When a 2-year currency swap between U.S. Dollars and Currency X is created, the exchange rate is X1.95/USD and the term structures of interest rates are flat at 3.07% in the U.S. and 2.51% in Country X. The swap has annual payments and a notional principal of $1 million. 17 months later, the exchange rate is X2.19/USD and the term structures of interest rates are flat at 4.1% in the U.S. and 2.8% in Country X. For the party that is paying dollars, what is the present value of this swap?
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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D4)
When a 2-year currency swap between U.S. Dollars and Currency X is created, the exchange rate is X1.95/USD and the term structures of interest rates are flat at 3.07% in the U.S. and 2.51% in Country X. The swap has annual payments and a notional principal of $1 million. 17 months later, the exchange rate is X2.19/USD and the term structures of interest rates are flat at 4.1% in the U.S. and 2.8% in Country X. For the party that is paying dollars, what is the present value of this swap?
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