# NZ Bank issues 90 day commercial paper in the US market with a face value of USD25

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## Question:

NZ Bank issues 90 day commercial paper in the US market with a face value of USD25 million at 1.75% p.a. They use an FX swap to hedge their FX exposure. (For the U.S. use a 360-day year but assume simple interest calculations). Required:

(a) Calculate the forward rate component of the FX swap if the spot rate is AUD/USD 0.7300 and the Australian interest rate is 3.5% p.a.;

(b) Calculate the AUD proceeds from the commercial paper issue and the AUD amount required at maturity;

(c) Calculate the effective interest rate paid by ANZ Bank.

**Related Book For**

## Systems analysis and design

ISBN: ?978-1118808177

5th edition

Authors: Alan Dennis, Barbara Haley Wixom, Roberta m. Roth