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-interest I. Finance 201415 2018'15 Question 1 cal & firm is rated AAA and is able to raise capital in us dollars at Floating rate of HIBOR +0:5 of or Canadian dollars at sis of flat. However, y firm, with a rating of A, is only able to raise the capitalin Us dollarat floating rate of 0.75 of orin Canadian dollars at a fixed rate of 6.75.10. Assume that X wants to borrowest US dollars at a floating rate of interest and y wants to borrow Canadian dollars at a fixed rate of interest. A financial institution is planning to arrange a swap thabis and requives a 30-basis- point spread. Construct a swap equally attractive to X andy and show the rates of interest they will end up paying. Cb) one year borrowing and depositrates are 12.5p and 10-5.4. respectively in the us and 10 sop and 8.5 of respectively in Germany. The spot exchange rate for the us dollar is $1.50 to the Euro. The 12-month forward rate is & 1:55. Assuming you do not have any initial investment funds, suggest a way you might profit from the priting inconsistency presented above the explain why the situation may . not persist forever. (c) Xhehe has a 3 million dollar floating rateloan which is re-set 2-se tevery 6 months It wants to protect itself from arising interest rate in the next 6 months It purchases a 360o 6 v 15 12 Forward Rate Agreement (FRA) on a notional amount of 3 million dollar. At the start date of the FRA, the market interest rateon Floating race debt is 3.5ofo per annum. Calculate the amount receivable by & from the writer of the FRA at the beginning of the FRR period, assuming 30 day months in a year. ciiCalculate the actual interest cost of the loan and justify your answer. Tilih calculate the interest pay able the providers of finance at the end of month 12 by x to may or -interest I. Finance 201415 2018'15 Question 1 cal & firm is rated AAA and is able to raise capital in us dollars at Floating rate of HIBOR +0:5 of or Canadian dollars at sis of flat. However, y firm, with a rating of A, is only able to raise the capitalin Us dollarat floating rate of 0.75 of orin Canadian dollars at a fixed rate of 6.75.10. Assume that X wants to borrowest US dollars at a floating rate of interest and y wants to borrow Canadian dollars at a fixed rate of interest. A financial institution is planning to arrange a swap thabis and requives a 30-basis- point spread. Construct a swap equally attractive to X andy and show the rates of interest they will end up paying. Cb) one year borrowing and depositrates are 12.5p and 10-5.4. respectively in the us and 10 sop and 8.5 of respectively in Germany. The spot exchange rate for the us dollar is $1.50 to the Euro. The 12-month forward rate is & 1:55. Assuming you do not have any initial investment funds, suggest a way you might profit from the priting inconsistency presented above the explain why the situation may . not persist forever. (c) Xhehe has a 3 million dollar floating rateloan which is re-set 2-se tevery 6 months It wants to protect itself from arising interest rate in the next 6 months It purchases a 360o 6 v 15 12 Forward Rate Agreement (FRA) on a notional amount of 3 million dollar. At the start date of the FRA, the market interest rateon Floating race debt is 3.5ofo per annum. Calculate the amount receivable by & from the writer of the FRA at the beginning of the FRR period, assuming 30 day months in a year. ciiCalculate the actual interest cost of the loan and justify your answer. Tilih calculate the interest pay able the providers of finance at the end of month 12 by x to may or