In September 2020, swap dealers were quoting a rate for five-year euro interest-rate swaps of 5.4% against Euribor (the short-term interest rate for euro loans). Euribor at the time was 5.0%. Suppose that A arranges with a dealer to swap a C10 million five-year fixed-rate loan for an equivalent floating-rate loan in euros, answer the following: (Leave no cells blank - be certain to enter "O" wherever required,.) a. Assume the swap is fairly priced. What is the value of this swap at the time that it is entered into? Swap value b. Suppose that immediately after A has entered into the swap, the long-term interest rate rises by 2.0%. Who gains and who loses? Dealer gains; A loses A gains; Dealer loses

In September 2020, swap dealers were quoting a rate for five-year euro interest-rate swaps of 5.4% against Euribor (the short-term interest rate for euro loans). Euribor at the time was 5.0%. Suppose that A arranges with a dealer to swap a C10 million five-year fixed-rate loan for an equivalent floating-rate loan in euros, answer the following: (Leave no cells blank - be certain to enter "O" wherever required,.) a. Assume the swap is fairly priced. What is the value of this swap at the time that it is entered into? Swap value b. Suppose that immediately after A has entered into the swap, the long-term interest rate rises by 2.0%. Who gains and who loses? Dealer gains; A loses A gains; Dealer loses

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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) In another case are these quotes: Spot rate €1.2562/£; 1 month forward €1.2662/£. Which of the two currencies is trading at forward premium?
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Mr. Sami approached his FOREX trader and was informed that the spot rate is EUR 2.1565/OMR. The trader stated that this exchange rate is expected to change after one month specifically the OMR may appreciate by 1%. What will be the value of EUR against OMR? O a. EUR/OMR= 0.4591 O b. OMR 0.6491/EUR O C EUR 0.5419/OMR O d. 1 OMR= 0,4591 EUR
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
Today is the 10th January 2023. You want to buy a Floating Rate Note (FRN) that matures on the 10th July 2027 and pays an annual coupon equal to LIBOR. Compute the fair price of the note. Use the data in Table 1. The LIBOR rate at selected dates are showed in Table 3. Please show your calculations. Discuss your result.
D6) The forward exchange rate of 55 days is 1.21 USD/Euro while the current exchange rate is 1.22 USD/Euro. The annual interest rate of USA is 1.13% and of Eurozone is 1.18%. Calculate and show me how you have solved it the cost of the term act and choose one of the following: a. -5.365% b. 5.365% c. -0.819% d. 8.2%
(a) Suppose a trader takes a position on June 5th 2021, in one September 2021 EURO (EUR) future contract at USD1.3094/EUR. The trader holds the position until the last day of trading when the spot price is USD1.2939/EUR. This will be the final settlement price because of price convergence. The trader has EUR125,000 for this investment. (i) If the trader had a long position and he was a speculator, calculate his profit or loss for the position above. (ii) If the trader had a short position and he was a speculator, calculate his profit or loss for the position above. (iii) If the trader had a long position and he was a hedger, calculate his profit or loss for the position above. (iv) If the trader had a short position and he was a hedger, calculate his profit or loss for the position above. (b) Discuss factors that you would consider in evaluating the political risk associated before making FDI in a foreign country.
You Answered Today you observe the folowing quotes: Spot EURUSD $1.37 60 Day Forward EURUSD = $1.15 In 60 day you expec to receive 281,718 Euros. In 60 days you expect the EURUSD exchange rate to be $1.17. In 60 days the EURUSD actually is $1.21. You decided to hedge your receivables with a forward. How many USD will you receive? 232,824.79
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.
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
Suppose that a bank has agreed to the following terms of an interest rate swap: - The notional principal is CAD 300 million and the remaining life of the swap is 11 months. - The bank pays 8% per annum, and receives three-month LIBOR. - Payments are exchanged every three months. - The swap (fixed) rate is 11% per annum for all maturities. - The three-month LIBOR rate a month ago was 12.5% per annum. All rates are compounded quarterly. Estimate the value of the swap using a) a bond-price valuation method, and b) a FRAS-based method?

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