SCENARIO 5: VALUE A CURRENCY SWAP
90 days ago, the mutual fund entered into a one-year currency swap by agreeing to swap US dollars for euros at the fixed rates. The annualised fixed rate in dollars and euros are 7.84% and 6.48%, respectively. The exchange rate at the start of the swap was $0.75. The new exchange rate today is $0.70. Assume that the notional dollar amount is $20,000,000. The payments are made semi-annually based on the assumption of 30 days per month and 360 days in a year. The adjustment Current LIBOR and Euribor rates are shown in the Exhibit 4.
Task 5: Your task is to determine the market value of the swap today from the mutual fund’s
perspective, who pays dollars and receives euros.
Students succeed in their courses by connecting and communicating with an expert until they receive help on their questions
Consult our trusted tutors.
Developed by Versioning Solutions.