Determine rates that company enter into a $/£ currency swap, Financial Management

Suppose a company is quoting swap rates as follows:  7.75 - 8.10 percent yearly against 6-month dollar LIBOR for dollars and 11.25 - 11.65 percent yearly against six-month dollar LIBOR for British pound sterling. At what rates will company enter into a $/£ currency swap?

Solution: Company will pay annual fixed-rate dollar payments of 7.75 percent against receiving 6-month dollar LIBOR flat, or it will receive fixed-rate annual dollar payments at 8.10 percent in opposition to paying six-month dollar LIBOR flat.  Morgan Guaranty will create annual fixed-rate £ payments at 11.25 percent in opposition to receiving six-month dollar LIBOR flat, or it will receive yearly fixed-rate £ payments at 11.65 percent against paying six-month dollar LIBOR flat. So, Morgan Guaranty will enter into a currency swap in which it would pay yearly fixed-rate dollar payments of 7.75 percent in return for receiving semi-annual fixed-rate £ payments at 11.65%, or it will receive annual fixed-rate dollar payments at 8.10 percent in opposition to paying annual fixed-rate £ payments at 11.25 percent.

Posted Date: 5/10/2013 1:56:48 AM | Location : United States







Related Discussions:- Determine rates that company enter into a $/£ currency swap, Assignment Help, Ask Question on Determine rates that company enter into a $/£ currency swap, Get Answer, Expert's Help, Determine rates that company enter into a $/£ currency swap Discussions

Write discussion on Determine rates that company enter into a $/£ currency swap
Your posts are moderated
Related Questions
Fund Managers or the Asset Management Company (amc) The role of fund managers is highly significant in the mutual fund operations. So far, this role is being played by the Mutu

The option features embedded in many bonds and fixed-income securities have made the binomial interest rate tree approach a valuable model for pricing debt. Binomial

The Donut Shop, Inc. is planning to add a 2nd Donut Shop by opening a new store across from Webster University. A survey of the area has already been completed at a cost of $150,00

Q. Explain about Net Working Capital Concept? Net Working Capital Concept: - Net working capital demotes to the difference among current assets and current liabilities. Current

Mathematical Property The sum of the deviations of the items from median, ignoring signs, is the least. For example, the median of 6, 10, 14, 18 and 22 is 14. The deviations fr

Scenario: Brands and businesses in just about every industry are in a state of war with their competitors through promotions and marketing strategies. Majority of renowned brands

What are the objectives of the Insurance Companies? Insurance companies: The main objective of insurance companies is to prevent individuals and firms (termed as policy-h

What is the Hirfindahl-Hirschman Index? A: The Hirfindahl-Hirschman Index, or HHI, is the standard measure employed by economists to evaluate market concentration. The greater

The management of Nelson plc wish to estimate their firm’s equity beta. Nelson has had a stock market quotation for only two months and the financial management feels that it would

Preferably all customers will settle within the agreed terms of trade. If this doesn't happen a company needs to have in place agreed procedures for dealing with overdue accounts.