A Inc. and B Inc. intend to borrow $ 200,000 and $ 200,000 in respectively for...
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A Inc. and B Inc. intend to borrow $ 200,000 and $ 200,000 in respectively for a time horizon of one year. The prevalent interest rates are as follows: Company ¥ Loan $ Loan A Inc 5% 9% B Inc 8% 10% The prevalent exchange rate is $1 = ¥120. They entered in a currency swap under which it is agreed that B Inc will pay A Inc @ 1% over the * Loan interest rate which the later will have to pay as a result of the agreed currency swap whereas A Inc will reimburse interest to B Inc only to the extent of 9%. Keeping the exchange rate invariant, quantify the opportunity gain or loss component of the ultimate outcome, resulting from the designed currency swap. A Inc. and B Inc. intend to borrow $ 200,000 and $ 200,000 in respectively for a time horizon of one year. The prevalent interest rates are as follows: Company ¥ Loan $ Loan A Inc 5% 9% B Inc 8% 10% The prevalent exchange rate is $1 = ¥120. They entered in a currency swap under which it is agreed that B Inc will pay A Inc @ 1% over the * Loan interest rate which the later will have to pay as a result of the agreed currency swap whereas A Inc will reimburse interest to B Inc only to the extent of 9%. Keeping the exchange rate invariant, quantify the opportunity gain or loss component of the ultimate outcome, resulting from the designed currency swap.
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Requirement Loun rate Loan rate 5 BMC Equivalent onow... View the full answer
Related Book For
Income Tax Fundamentals 2013
ISBN: 9781285586618
31st Edition
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill
Posted Date:
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