Question: / At t = 0 , we are in 8 / 1 / 2 0 1 9 The company Ford will start a currency swap

/ At t=0, we are in 8/1/2019
The company Ford will start a currency swap with the Brazilian company Skol.
The first payments will start in 3/1/2020 and will continue each year until 3/1/24.
The principals in the two currencies are $60 million and 300 million Real.
At this time, suppose that the term structure of LIBOR/swap interest rates is:
In Brazil: 3/1/2020 r =4%
3/1/2021 r =8.264%
3/1/2022 r =12.811088%
3/1/2023 r =17.7747759%
3/1/2024 r =23.6635147%
In the United States: 3/1/2020 r =3%
3/1/2021 r =7.12%
3/1/2022 r =11.19056%
3/1/2023 r =15.0822296%
3/1/2024 r =181894498%
Ford will receive 3% per annum (continuously compounded)
The exchange rate is 4.66 BRL/USD
What should be the rate that Ford would pay to Skol?

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock blur-text-image
Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock
Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!