Consider the following 3-year currency swap, which involves exchanging annual interest of 2.75% on 10 million US dollars for 3.75% on 15million Canadian dollars. The CAD/USD spot rate is 1.52. The term structure is flat in both countries. Calculate the value of the swap in USDif interest rates in Canada is 5% and in the United States are 4%. Assume continuous compounding. Round to the nearest dollar.

B. $145,693

C. $131,967

D. $127,818

Answer rating: 100% (QA)

Option C Vswap USD BUSD Spot rate x BCAD ... View the full answer