In the U.S., the 180-day yield on AAA corporate bonds is 6%. The fixed rate on a
Question:
In the U.S., the 180-day yield on AAA corporate bonds is 6%. The fixed rate on a 2-year plain vanilla swap with 180-day settlement periods is priced at 7.08%. In Great Britain, the 180-day prime rate is 3%. The fixed rate on a 2-year plain vanilla swap with 180-day settlement periods is priced at 3.78%.. A swap is initiated with a notional value of $ 2,000,000. The spot exchange rate is $1.6 / GBP.
30-days later
The exchange rate is $ 1.5/GBP.
The U.S. AAA yield curve looks like this:
| t | L0,t |
| 150 | 6.25% |
| 330 | 6.50% |
| 510 | 7.00% |
| 690 | 7.00% |
The British prime yield curve looks like this:
| 150 | 3.50% |
| 330 | 3.80% |
| 510 | 4.00% |
| 690 | 4.00% |
What are the fixed GBP payments associated with this currency swap (every 180 days until expiration)? GBP [x] (no - or + sign)
The value of the fixed dollar payments arm in the swap, 30 days after initiation, in dollars, is $ [y].
The value of the floating dollar payments arm in the swap, 30 days after initiation, in dollars is $ [z].
The value of the fixed GBP payments arm in the swap, 30 days after initiation, in dollars, is $ [v].
The value of the floating GBP payments arm in the swap, 30 days after initiation, in dollars is $ [w].
The value of paying floating dollar AAA yields and receiving fixed GBP prime rates, 30 days after initiation, is [s].
The value of paying floating UK prime rates in GBP and receiving floating U.S. AAA corporate rate in dollars is [t].
Do not use commas to separate thousand and millions. Round your answers to integers.
Expert Answer:
Fixed GBP payments associated with this currency swap every 180 days until expiration x 34000 Notional amount is 2000000 Fixed rate on GBP swap is 378 ... View the full answer
Introduction To Corporate Finance
ISBN: 9781118300763
3rd Edition
Authors: Laurence Booth, Sean Cleary
