Question: Question1 A,B, and C please. Thank you 0.80% 3 4 1) Your company has been doing business for some time in Australia under a subsidiary.

Question1 A,B, and C please. Thank you

Question1 A,B, and C please. Thank you 0.80% 3 4 1) Your

0.80% 3 4 1) Your company has been doing business for some time in Australia under a subsidiary. Your company has decided that it wants to bring over a large amount of the firm's Australian profits. The firm has decided for the next 12 months to convert AUD into USD each month. As a result, you are looking into entering a swap to receive USD and pay AUD. Assume the notional principle on the transaction is USD 200,000,000 and the current spot rate is 0.7500 USD/ 1 AUD. The current rates below are per annum with continuous compounding. Months USA Australia 1 2.70% 2 0.80% 2.80% 1.00% 2.90% 1.00% 3.00% 1.25% 3.00% 6 1.25% 3.00% 7 1.50% 3.10% 1.50% 3.10% 1.75% 3.20% 1.75% 3.25% 11 2.00% 3.30% 12 2.00% 3.35% A) What is the fixed rate for USD and AUD in this problem? B) What are the USD cash flows and the AUD cash flows each month? C) 6 months have now passed and the new rates are listed below. The current exchange rate is also 0.7475 USD/1 AUD. What is your current position worth now? 5 8 9 10 Months USA Australia 1 1.60% 3.00% 2 1.60% 3.00% 3 1.75% 3.25% 4 3.25% 5 1.90% 3.40% 6 2.00% 3.40% 1.75% 0.80% 3 4 1) Your company has been doing business for some time in Australia under a subsidiary. Your company has decided that it wants to bring over a large amount of the firm's Australian profits. The firm has decided for the next 12 months to convert AUD into USD each month. As a result, you are looking into entering a swap to receive USD and pay AUD. Assume the notional principle on the transaction is USD 200,000,000 and the current spot rate is 0.7500 USD/ 1 AUD. The current rates below are per annum with continuous compounding. Months USA Australia 1 2.70% 2 0.80% 2.80% 1.00% 2.90% 1.00% 3.00% 1.25% 3.00% 6 1.25% 3.00% 7 1.50% 3.10% 1.50% 3.10% 1.75% 3.20% 1.75% 3.25% 11 2.00% 3.30% 12 2.00% 3.35% A) What is the fixed rate for USD and AUD in this problem? B) What are the USD cash flows and the AUD cash flows each month? C) 6 months have now passed and the new rates are listed below. The current exchange rate is also 0.7475 USD/1 AUD. What is your current position worth now? 5 8 9 10 Months USA Australia 1 1.60% 3.00% 2 1.60% 3.00% 3 1.75% 3.25% 4 3.25% 5 1.90% 3.40% 6 2.00% 3.40% 1.75%

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