Please help with "Question 3 continued"

Question 3: (16 marks)

a. The subsidiary in Australia generates a significant amount of profit, which can be utilized to fund the import of manufacturing equipment from South Korea for the electronic component plant in Singapore. The CEO has initiated negotiations with the South Korean equipment supplier, who is willing to offer XYZ a payment period of 3 years. However, the payments must be made through quarterly installments of 62,000,000 WON by the Australia subsidiary. To facilitate this arrangement, the CEO has requested the construction of a currency swap that enables the utilization of the Australia subsidiary's profits to cover the equipment costs. To proceed with the three-year currency swap, you will apply the swap bank quotes. Additionally, a graphical representation of the swap will be provided to help the CEO visualize how the swap arrangement will function.

Workings:

Calculation of the notional principal of the hedge in South Korea WON:

	Provide your answers in the cells below	Marks
Payments to be conducted by XYZ subsidiary in Australia	62,000,000	0.5 mark
How often? Monthly = 12/ Quarterly = 4/Semi-annual = 2	4	0.5 mark
Swap bank WON Bid rate	1.54	0.5 mark
Therefore, notional WON principal calculated with information above	62,000,000	0.5 mark

Calculation of the notional principal of the hedge in Australia AUD:

	Provide your answers in the cells below	Marks
Spot exchange rate SGD/WON ask rate	0.0008	0.5 mark
Spot exchange rate SGD/AUD bid rate	0.7225	0.5 mark
Therefore, Australia AUD notional principal calculated with information above.	49,600	0.5 mark
Swap bank AUD ask rate	0.622	0.5 mark
Australia subsidiary pays quarterly:	3,213.67	0.5 mark
AUD/WON Exchange rate locked in for three years:	0.0006	0.5 mark

Question 3 continued:

Complete the diagram below to show the swap transaction graphically by inserting the correct interest rate or currency values below: (6 marks)

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