It is January 1st, 2020. A bank has five more years remaining in a currency swap according to which it makes annual interest payments at the end of each year at an effective annual rate of 4% on a 10,000,000USD principal and receives annual interest payments at the end of each year at an effective annual rate of 5% on a 13,500,00OCAD principal. The current USDCAD exchange rate is 1.35, compute the value of this currency swap for the bank based on the risk-free zero yields given below in continuously compounded form. 1 year З year 3% 2 year 4 year 5 year CAD 2.6% 2.8% 3.1% 3.2% USD 3% 3.3% 3.6% 3.8% 4%
It is January 1st, 2020. A bank has five more years remaining in a currency swap according to which it makes annual interest payments at the end of each year at an effective annual rate of 4% on a 10,000,000USD principal and receives annual interest payments at the end of each year at an effective annual rate of 5% on a 13,500,00OCAD principal. The current USDCAD exchange rate is 1.35, compute the value of this currency swap for the bank based on the risk-free zero yields given below in continuously compounded form. 1 year З year 3% 2 year 4 year 5 year CAD 2.6% 2.8% 3.1% 3.2% USD 3% 3.3% 3.6% 3.8% 4%
Financial Accounting Intro Concepts Meth/Uses
14th Edition
ISBN:9781285595047
Author:Weil
Publisher:Weil
ChapterA: Appendix - Time Value Of Cash Flows: Compound Interest Concepts And Applications
Section: Chapter Questions
Problem 27E
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Transcribed Image Text:It is January 1st, 2020. A bank has five more years remaining in a currency swap according to
which it makes annual interest payments at the end of each year at an effective annual rate
of 4% on a 10,000,000USD principal and receives annual interest payments at the end of
each year at an effective annual rate of 5% on a 13,500,00OCAD principal. The current
USDCAD exchange rate is 1.35, compute the value of this currency swap for the bank based
on the risk-free zero yields given below in continuously compounded form.
所 喃|
1 year
2.6%
З year
5 year
2 year
4 year
CAD
2.8%
3%
3.1%
3.2%
USD
3%
3.3%
3.6%
3.8%
4%
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