Assume you have 7,000,000. Would it be advantageous to do aa 9-month currency swap given the following information:

- Deposit interest rates on Euro is 3.5%

- Deposit interest rate on US Dollars is 6%

- Spot $/ is 0.9285

- 9-Month $/ is 0.9022

7,000,000 / 0.9285 = $ 7,539,041.46

Deposit at 6% for 270 days to get: $7,878,298.33

Convert to Euro to get 7,107,800

If invest Euro at 3.5% we would have 7,183,750

So loss of: 7,107,800 - 7,183,750 = -75,949.2470

Explain how the underline number is obtain.

Answer rating: 100% (QA)

To calculate the loss in the currency swap we need to consider the foll... View the full answer