HSBC recently arranged a three year swap between Oman Oil and Aramco. Oman oil needs US dollar floating rate funds, and Aramco needs US dollar fixed rate funds. The rates at which they can get the required funds in their respective markets are shown in the following table Floating Rate Funds Fixed Rate Funds Oman Oil LIBOR+ 4% 11% Aramco LIBOR+ 1% 10% ARRANGE A SWAP (you can either explain or drawa diagram)

HSBC recently arranged a three year swap between Oman Oil and Aramco. Oman oil needs US dollar floating rate funds, and Aramco needs US dollar fixed rate funds. The rates at which they can get the required funds in their respective markets are shown in the following table Floating Rate Funds Fixed Rate Funds Oman Oil LIBOR+ 4% 11% Aramco LIBOR+ 1% 10% ARRANGE A SWAP (you can either explain or drawa diagram)

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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On 15 April 2021, JHB Bank quoted the following spot and swap rates between the rand and the euro (ZAR/EUR) to a client called MAZDALtd.Rates quoted by JHB Bank on (ZAR/EUR): Bid – OfferSpot (ZAR/EUR) (Spot date: 15 April 2021): 15.7258 – 19.55672-month swap rate (i.e., Forward value date: 15 June 2021): 1290 – 135012-month swap rate (i.e., Forward value date: 15 April 2022): 7055 – 9534Other important informationExpected inflation rate in SA over next 12 months: 4.67%Expected inflation rate in euro area over next 12 months: 1.95%The price of one Apple MacBook computer in euro area: EUR 689The price of one Apple MacBook computer in South Africa: ZAR 22350Euro area 12-month interest rate: 3.50% South African 12-month interest rate: 8.90% 2.1 The exchange rate at which JHB Bank is willing to sell the ZAR spot is ____? 2.2 The exchange rate at which JHB Bank is willing to buy the EUR two months forward is _____? 2.3 The exchange rate at which MAZDA Ltd. will buy the EUR 12 months forward?…
Please help and show calculation. Consider two companies: Honda and IBM. Honda wants to borrow US$ for the following 5 years at a fixed rate, while IBM wants to borrow Yen also for the following 5 years at a fixed rate. The rates available to two companies in US$ and Yen markets are shown below. US$ Yen Honda 8.0% 7.6% IBM 5.4% 6.6% 1. What is the total gain from the currency swap? Which firm has the comparative advantage in US dollar market, IBM or Honda?
Company A and B has been offered the following rates per annum on a £10 million 5 - year loan. Company Fixed (%) Floating (%) A 5 LIBOR + 1.2 B 6 LIBOR + 0.3 Company A requires a floating rate loan, whereas company B requires a fixed rate loan. In which market does company A have a comparative advantage? Design a swap that will give a bank, acting as an intermediary 0.5% p.a. and that will appear equally attractive to both companies. Explain how to achieve this, using diagrams and text. (15 Marks) (Please answer without use of excel)
The firm you work for is Multinational Widget Inc. You are involved in a fixed-for-fixed currency swap between ¥ and $US. The swap has 5 years left to maturity and a principal of $1 million US or ¥100 million. In the swap, you make annual payments of $80,000 to the bank (and also pay the principal at maturity) and you receive annual payments of ¥10,000,000 per year (and also receive the principal at maturity). Assume that when this swap was set up, it was "at market", meaning that the net value to you was zero. If the current spot rate is 90 ¥/$US, the current interest rate for ¥ is 12% and the current interest rate for $US is 10%, what is the value of your swap position? $4,035.50 US $5,565.250 US $80,345.50 US $90,67.50 US None of these
This is required data
Company A wants to borrow US Dollar (USD) at a floating rate of interest and Company B want to borrow Australian Dollar (AUD) at a fixed rate of interest. They have been quoted the following rates by Bank C. USD AUD Company A LIBOR +0.5% 5.0% Company B LIBOR+1.0% 6.5% Develop an interest rate swap that will net the bank 50 basis point spread and will appear equally attractive to Company A and Company B. Explain your answer.
Suppose that Banco Bradesco in Brazil would like to enter a swap for USD100,000 three months from now for six months and the following quotes are available. Which of the following statements correctly describes the swap? Exchange Spot Rate BRL/USD 5.05/25 3-month 6-month 12/23 25/36 9-month 47/58 Banco Bradesco buys USD at 5.48 in 3 months' time; and buys BRL at 5.52 in 9 months' time Banco Bradesco buys USD at 5.17 in 3 months' time; and sells BRL at 5.83 in 9 months' time Banco Bradesco buy USD at 5.48 in 3 months' time; and sells BRL at 5.3 in 6 months' time Banco Bradesco buys USD spot at 5.05; and sells BRL at 5.61 at in 6 months' time
A foreign exchange dealer in Kigali Rwanda provides quotes for the spot and 3 month forward rates for the RFr against the dollar. Bid (RFr/U$$) ask (RFr/U$$) Spot 4.0040 4.0200 3-month forward 3.9690 3.9888 Required: a. What would you receive in dollars if you sell RFr 5 million at the spot rate? b. What would it cost in dollars to purchase RFr 20 million forward 3 month? When would you make payment?
Company A (a U.S. MNC) wants to borrow £10,000,000 at a fixed rate for five year. Company B (a U.K. MNC) wants to borrow $16,000,000 at a fixed rate for five year. Today's exchange rate is £1- $1.6. The information below summarizes what each company can do without using swaps. Company A Company B $ Loans 8 10.6 £ Loans 11.6 12.4 If Company A wants to save 0.3% of the £10,000,000 loan through a Swap Bank, and If Company B wants to save 0.2% of the $16,000,000 loan through a Swap Bank. How much can the Swap bank earn on pound (£) loans (in terms of %) after meeting Company A and Company B's demand? (if your answer is 1.34%, just enter "1.34". If your answer is -1.34%, just enter"-1.34").
You can borrow CAD (Canadian dollar) at 8 percent, which is 2 percent above the swap rate, or at CAD Libor + 1 percent. If you want to borrow at a fixed-rate, what is the best way: direct, or synthetic (that is, using a floating-rate loan and a swap)? Direct borrowing would be to borrow at a fixed rate of 8 percent. Synthetic fixed-rate cad borrowing would be to borrow CAD at a floating rate of Libor + 1 percent and arrange a swap where you pay fixed 6 percent CAD in exchange for receiving CAD Libor.
Assume the following information: 90-day U.S. interest rate 90-day Malaysian interest rate 3% 5% 90-day forward rate of Malaysian ringgit Spot rate of Malaysian ringgit $0.394 $0.398 Assume that the Santa Barbara Co. in the United States will need 250,000 ringgit in 90 days. It wishes to hedge this payables position. Would it be better off using a forward hedge or a money market hedge? Substantiate your answer with estimated costs for each type of hedge. Do not round intermediate calculations. Round your answers to the nearest dollar. The firm will pay out $ in 90 days if it uses the forward hedge and $ if it uses the money market hedge. Thus, it should use the -Select- hedge.
Please Help The Swiss Franc is trading at 1.1464 $/ SFr, the euro is trading at 1.0828 $/euro. If you can buy or sell SFr/euro at 0.9451, is there an arbitrage? If so, how much can you make with one round - trip using $1,000,000 ? Please Help

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