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

Ask an Expert

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

Write your message here..

Related Questions

Internal revenue service (irs), Explain:- Q.1 Explain the ways in which... 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

Quasi-reorganization, Quasi-Reorganization - Type of reorganization in that... Quasi-Reorganization - Type of reorganization in that, with shareholder approval, management revalue ASSETS and eliminates DEFICIT (increased by asset devaluations if any) by charg

Classifying expenses by nature-income statement, Classifying expenses by na... Classifying expenses by nature Under this format, expenses are not classified by their nature i.e. referred to specifically according to their type and the major categories of ex

What is cs optimal decision, Copper Suppliers, Inc. (CS), is a distributor ... Copper Suppliers, Inc. (CS), is a distributor of commercial grade copper. CS purchases copper directly from copper mines and then after refining it, sells the refined copper to in

Financial Statement Analysis Group Project 2, Financial Statement Analysis ... Financial Statement Analysis Group Project 2 ACCT3303 Spring 2013 Due Date: May 5 (by the end of the day) The specific purposes of this project are: 1. Apply to actual companies th

Balance sheet., how to prepare how to prepare

Wider-range investments-accounts under trustee, Wider-range Investments ... Wider-range Investments (Requiring advice in writing from a properly qualified person) Quoted shares of a company with a paid-up capital of not less than Shs10m and has

Major qualitative characteristics of accounting information, Four major qua... Four major qualitative characteristics of accounting information There are four major qualitative characteristics which influence usefulness of accounting information. Additio

Holding company with a subsidiary and a sub-subsidiary, Holding company wit... Holding company with a subsidiary and a sub-subsidiary Where the subsidiary company has another subsidiary company, then that subsidiary is referred to as a sub-subsidiary compan

Determine the range and quality of information, Determine the Range and qua... Determine the Range and quality of information Financial accounting reports concentrate on information which can be quantified in monetary terms. Management accounting addition