Consider the following fixed-floating-rate currency swap of assets: 5 percent (annual coupon) fixed-rate U.S. $1 million bond

Question:

Consider the following fixed-floating-rate currency swap of assets: 5 percent (annual coupon) fixed-rate U.S. $1 million bond and floating-rate SF1.5 million bond set at LIBOR annually. Currently LIBOR is 4 percent. The of the swap is SF1.5 million. The spot is SF1.5/$.

a. What are the realized cash flows on the swap at the spot If the 1-year forward rate is SF1.538 per US$, what are the realized net cash flows on the swap? Assume LIBOR is unchanged.

c. If LIBOR increases to 6 percent, what are the realized cash flows on the swap? Evaluate at the forward rate.

Exchange Rate
The value of one currency for the purpose of conversion to another. Exchange Rate means on any day, for purposes of determining the Dollar Equivalent of any currency other than Dollars, the rate at which such currency may be exchanged into Dollars... Face Value
Face value is a financial term used to describe the nominal or dollar value of a security, as stated by its issuer. For stocks, the face value is the original cost of the stock, as listed on the certificate. For bonds, it is the amount paid to the...