The subsidiary in Australia generates a significant amount of profit, which can be utilized to fund...

  
  

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The subsidiary in Australia generates a significant amount of profit, which can be utilized to fund the import of manufacturing equipment from South Korea for the electronic component plant in Singapore. The CEO has initiated negotiations with the South Korean equipment supplier, who is willing to offer XYZ a payment period of 3 years. However, the payments must be made through quarterly installments of 62,000,000 WON by the Australia subsidiary. To facilitate this arrangement, the CEO has requested the construction of a currency swap that enables the utilization of the Australia subsidiary's profits to cover the equipment costs. To proceed with the three-year currency swap, you will apply the swap bank quotes. Additionally, a graphical representation of the swap will be provided to help the CEO visualize how the swap arrangement will function. Relevant information required for these calculations and the graphical representation is provided below: Exchange rates: Spot SGD/JPY SGD/Won SGD/CAD SGD/GBP SGD/AUD SGD/ZAR Bid 0.0094 0.0006 0.7614 1.3034 0.7225 0.0606 Ask 0.0095 0.0008 0.7616 1.3038 0.7226 0.0607 Current borrowing interest rates on loans: Singapore Japan South Korea Canada UK Australia South Africa Fixed 0.640% 0.525% 1.164% 0.666% 0.577% 0.612% 5.045% Libor 0.130% 0.015% 0.654% 0.156% 0.067% 0.102% 4.535% BANK CURRENCY SWAP INTEREST RATE QUOTES AGAINST U.S. LIBOR RATE SGD Yen Won CAD$ Years AUS Ask% Bid% Ask% Bid% Ask% Bid% 0.676 0.567 0.587 0.602 0.622 5.035 5.055 0.686 0.577 0.597 0.612 0.632 5.045 5.065 0.696 0.587 0.607 0.622 0.642 5.055 5.075 0.706 0.597 0.617 0.632 0.652 5.065 5.085 0.716 0.607 0.627 0.642 0.662 5.075 5.095 0.726 0.617 0.637 0.652 0.672 5.085 5.105 0.736 0.627 0.647 0.662 0.682 5.095 5.115 0.746 0.637 0.657 0.672 0.692 5.105 5.125 0.756 0.647 0.667 0.682 0.702 5.115 5.135 0.692 0.712 5.125 5.145 GBP Bid% 1 0.630 2 0.640 0.660 0.525 0.545 3 0.650 0.670 0.535 0.555 0.660 0.680 0.545 0.565 0.670 0.690 0.555 0.575 0.680 0.700 0.565 0.585 4 5 Ask% Bid% Ask% Bid% Ask% Bid% Ask% 0.650 0.515 0.535 1.154 1.174 0.656 1.164 1.184 0.666 1.174 1.194 0.676 1.184 1.204 0.686 1.194 1.214 0.696 1.204 1.224 0.706 1.214 1.234 0.716 8 0.700 0.720 1.224 1.244 0.726 9 0.710 0.730 0.595 0.615 1.234 1.254 0.736 0.720 0.740 0.605 0.625 1.244 1.264 0.746 0.766 0.657 0.677 6 7 0.690 0.710 0.575 0.595 0.585 0.605 10 Other summarised information: Australia subsidiary profits generated quarterly: Import cost of equipment/machinery for the manufacturing of electronic components in Singapore: ZAR AUD500,000 WON74,000,000 The subsidiary in Australia generates a significant amount of profit, which can be utilized to fund the import of manufacturing equipment from South Korea for the electronic component plant in Singapore. The CEO has initiated negotiations with the South Korean equipment supplier, who is willing to offer XYZ a payment period of 3 years. However, the payments must be made through quarterly installments of 62,000,000 WON by the Australia subsidiary. To facilitate this arrangement, the CEO has requested the construction of a currency swap that enables the utilization of the Australia subsidiary's profits to cover the equipment costs. To proceed with the three-year currency swap, you will apply the swap bank quotes. Additionally, a graphical representation of the swap will be provided to help the CEO visualize how the swap arrangement will function. Relevant information required for these calculations and the graphical representation is provided below: Exchange rates: Spot SGD/JPY SGD/Won SGD/CAD SGD/GBP SGD/AUD SGD/ZAR Bid 0.0094 0.0006 0.7614 1.3034 0.7225 0.0606 Ask 0.0095 0.0008 0.7616 1.3038 0.7226 0.0607 Current borrowing interest rates on loans: Singapore Japan South Korea Canada UK Australia South Africa Fixed 0.640% 0.525% 1.164% 0.666% 0.577% 0.612% 5.045% Libor 0.130% 0.015% 0.654% 0.156% 0.067% 0.102% 4.535% BANK CURRENCY SWAP INTEREST RATE QUOTES AGAINST U.S. LIBOR RATE SGD Yen Won CAD$ Years AUS Ask% Bid% Ask% Bid% Ask% Bid% 0.676 0.567 0.587 0.602 0.622 5.035 5.055 0.686 0.577 0.597 0.612 0.632 5.045 5.065 0.696 0.587 0.607 0.622 0.642 5.055 5.075 0.706 0.597 0.617 0.632 0.652 5.065 5.085 0.716 0.607 0.627 0.642 0.662 5.075 5.095 0.726 0.617 0.637 0.652 0.672 5.085 5.105 0.736 0.627 0.647 0.662 0.682 5.095 5.115 0.746 0.637 0.657 0.672 0.692 5.105 5.125 0.756 0.647 0.667 0.682 0.702 5.115 5.135 0.692 0.712 5.125 5.145 GBP Bid% 1 0.630 2 0.640 0.660 0.525 0.545 3 0.650 0.670 0.535 0.555 0.660 0.680 0.545 0.565 0.670 0.690 0.555 0.575 0.680 0.700 0.565 0.585 4 5 Ask% Bid% Ask% Bid% Ask% Bid% Ask% 0.650 0.515 0.535 1.154 1.174 0.656 1.164 1.184 0.666 1.174 1.194 0.676 1.184 1.204 0.686 1.194 1.214 0.696 1.204 1.224 0.706 1.214 1.234 0.716 8 0.700 0.720 1.224 1.244 0.726 9 0.710 0.730 0.595 0.615 1.234 1.254 0.736 0.720 0.740 0.605 0.625 1.244 1.264 0.746 0.766 0.657 0.677 6 7 0.690 0.710 0.575 0.595 0.585 0.605 10 Other summarised information: Australia subsidiary profits generated quarterly: Import cost of equipment/machinery for the manufacturing of electronic components in Singapore: ZAR AUD500,000 WON74,000,000

Answer rating: 100% (QA)

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