Bank A and Bank B entered into a 1 year cross currency swap agreement. At the...

 

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Bank A and Bank B entered into a 1 year cross currency swap agreement. At the start of the agreement Bank A will provide 1 mln. Euro to Bank B at a FX Spot rate of USD 1.1. The Banks have agreed that at maturity, in addition to returning the principals exchanged at the start, Bank A will receive from Bank B payments in EUR equal to 0.2% to the amount provided at the start. Bank B on the other hand will receive from Bank A payments in USD equal to 0.1% of the amount provided at the start. Calculate the flow of currencies between the two parties at spot date and the forward date. Draw the flow of currencies between ALBERTA and the Bank for each of the legs (start and maturity). Bank A and Bank B entered into a 1 year cross currency swap agreement. At the start of the agreement Bank A will provide 1 mln. Euro to Bank B at a FX Spot rate of USD 1.1. The Banks have agreed that at maturity, in addition to returning the principals exchanged at the start, Bank A will receive from Bank B payments in EUR equal to 0.2% to the amount provided at the start. Bank B on the other hand will receive from Bank A payments in USD equal to 0.1% of the amount provided at the start. Calculate the flow of currencies between the two parties at spot date and the forward date. Draw the flow of currencies between ALBERTA and the Bank for each of the legs (start and maturity).

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The flow of currencies at spot date is calculated below Amount paid by bank A ... View the full answer