Hi can you please explain how to get this answer. Thank you. K-Roo Ltd.'s US competitor took out an AUD 27 million, 5-year loan to finance its expansions inAustralia.However, it prefers to make its debt payments in USD and therefore wants to swap into a fixed-rate USD loan.Westpac quotes the following annualized rates on 5-year currency swaps:USD: 7.61% bid and 7.88% offered against the 6-month dollar LIBORAUD: 4.14% bid and 4.49% offered against the 6-month dollar LIBORIf the current AUD/USD spot rate is 1.69, what are the semi-annual cash flows associated with thedebt payments of a AUD 27m swap?You want to swap out of a AUD 27 mil loan and into a fixed-rate USD loan, and you can ignore theoff-setting LIBOR payments.a. USD 0.629467 mil payment to Westpac; receive AUD 0.558900 mil payment fromWestpacb. receive USD 0.629467 mil payment from Westpac; AUD 0.558900 mil payment toWestpacc. USD 1.258935 mil payment to Westpac; receive AUD 1.117800 mil payment from Westpacd. receive USD 1.258935 mil payment from Westpac; AUD 1.117800 mil payment to Westpace. USD 0.607899 mil payment to Westpac; receive AUD 0.558900 mil payment fromWestpac

To obtain loan from Westpac for USD, ask rate will apply = 7.88% p.a and to receive payments from…

Answered: ISD loan. pac quote

Business

Accounting

ISD loan. pac quote

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

Hi can you please explain how to get this answer. Thank you.

K-Roo Ltd.'s US competitor took out an AUD 27 million, 5-year loan to finance its expansions in
Australia.
However, it prefers to make its debt payments in USD and therefore wants to swap into a fixed-
rate USD loan.
Westpac quotes the following annualized rates on 5-year currency swaps:
USD: 7.61% bid and 7.88% offered against the 6-month dollar LIBOR
AUD: 4.14% bid and 4.49% offered against the 6-month dollar LIBOR
If the current AUD/USD spot rate is 1.69, what are the semi-annual cash flows associated with the
debt payments of a AUD 27m swap?
You want to swap out of a AUD 27 mil loan and into a fixed-rate USD loan, and you can ignore the
off-setting LIBOR payments.
a. USD 0.629467 mil payment to Westpac; receive AUD 0.558900 mil payment from
Westpac
b. receive USD 0.629467 mil payment from Westpac; AUD 0.558900 mil payment to
Westpac
c. USD 1.258935 mil payment to Westpac; receive AUD 1.117800 mil payment from Westpac
d. receive USD 1.258935 mil payment from Westpac; AUD 1.117800 mil payment to Westpac
e. USD 0.607899 mil payment to Westpac; receive AUD 0.558900 mil payment from
Westpac

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