You are in New Zealand, and have just set up a currency swap between NZD and USD.
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Question:
You are in New Zealand, and have just set up a currency swap between NZD and USD. The swap entails paying 4% NZD, and receiving 3% USD, quarterly, for three years. The exchange rate is USD 0.67 USD = NZD 1.
(a) What are the cash flows for the swap?
(b) 13 months later, the yield curve in New Zealand is flat at 3%, while the yield curve in the US is flat at 1%. The exchange rate is USD 0.6 = NZD 1. What is the swap worth to you (in NZD)?
Related Book For
Fundamentals of corporate finance
ISBN: 978-0470876442
2nd Edition
Authors: Robert Parrino, David S. Kidwell, Thomas W. Bates
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