implied exchange rate between usd and gbp , Financial Accounting

You have been provided with the following information on a fixed-fixed USD-GBP currency swap, the spot exchange rate between USD and GBP, and the USD and GBP yield curves:

  1. Five-year swap 5.5 per cent fixed coupon USD for 6.125 per cent fixed coupon GBP
  2. Notional principal of USD 15,000,000
  3. Spot exchange rate GBP 1 = USD 1.35
  4. Current discount yield curves USD 2.35 per cent flat, GBP 2.00 per cent flat.

(a) You wish to value the swap. What assumptions must you make to use the information that has been provided to you?

(b) What is the time zero value of the swap to the GBP receiver?

(c) What settlement payment will ensure fair value against the swap to both parties, and to whom must it be paid?

(d) What is the implied exchange rate between USD and GBP for the interest payments made under the swap? Should you expect this rate to match the current value of the exchange rate? Explain.

 

 

Posted Date: 3/28/2013 5:24:07 AM | Location : United States







Related Discussions:- implied exchange rate between usd and gbp , Assignment Help, Ask Question on implied exchange rate between usd and gbp , Get Answer, Expert's Help, implied exchange rate between usd and gbp Discussions

Write discussion on implied exchange rate between usd and gbp
Your posts are moderated
Related Questions
Explain the movements in working capital in terms of a business''s cash cycle. Explain some of the options available and their effect on the cash cycle.

Explain:- Q.1 Explain the ways in which the needs of internal and external users of accounting information are the same and different. Q.2 Why is it important for financial sta

Fund flow Math problem and solution.

Company A subsequently sells 60% of the voting interest in Company S for $900,000. The fair value of Company A's retained interest of 10% in the voting stock in Company S is $120,0

Q. Credit Reference Agencies and Credit Scoring ? A several organisations example Dun & Bradstreet and Standard & Poor provide credit scores and ratings for companies. These ma

Absorption costing is a cost accounting method that tries to charge all direct costs and all production costs of an organization to specific units of pr

Number of Periods of a one Payment a) If you deposit money today in an account that pays 7.5% yearly interest, how long will it take to double your money? b) What's the future

Accounting treatment of deferred tax The objective of accounting for deferred tax is to ensure that the profits for the period d onto fluctuate due to temporary differences. To a

how to prepare the accounts when goodwill is not to be maintained in the books

Refer to Note 12, Employee Benefit Plans and Other Postretirement Benefits (pp. 86-91) from the Consolidated Financial Statements of Harley-Davidson (hereafter HOG) 2008 Annual Rep