Currency swap valuation questions: a. What is the bond equivalent of a currency swap position in which
Question:
Currency swap valuation questions:
a. What is the bond equivalent of a currency swap position in which the counterparty agrees to swap a three-year, \(10 \%\) loan of \(\$ 15\) million for a three-year, \(7 \%\) loan of \(£ 10\) million?
b. What is the bond equivalent of a currency swap position in which the counterparty agrees to swap a three-year, \(7 \%\) loan of \(£ 10\) million for a three-year, \(10 \%\) loan of \(\$ 15\) million?
c. What is the forward exchange rate equivalent of a currency swap position in which the counterparty agrees to swap a three-year, \(10 \%\) loan of \(\$ 15\) million for a three-year, \(7 \%\) loan of \(£ 10\) million?
d. What is the forward exchange rate equivalent of a currency swap position in which the counterparty agrees to swap a three-year, \(7 \%\) loan of \(£ 10\) million for a three-year, \(10 \%\) loan of \(\$ 15\) million?
e. What is the value of an existing currency swap position in which the counterparty agrees to swap a two-year, \(10 \%\) loan of \(\$ 15\) million for a two-year, \(7 \%\) loan of \(£ 10\) million if the current dollar rate is \(9 \%\), sterling rate is \(7.5 \%\), and spot \(\$ / £\) exchange rate is \(\$1.45 / £\) ?
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