A Canadian corporation (ACC) has just entered into a two-year currency swap contract with Big Dealer Bank (BDB). The swap contract requires ACC to make semi-annual payments in Canadian dollars (C$) and receive semi-annual payments in U.S. dollars (US$). The notional amount in Canadian dollars is C$25 million. The accrual period for the swap is 180/360, assuming 360 days per year. The US$/C$ spot exchange rate is 0.77, with the Canadian dollar being the domestic currency for ACC. The term structures of C$ LIBOR and US$ LIBOR are as follows: Days C$ LIBOR (%) US$ LIBOR (%) 180 0.50 0.55 360 0.60 0.65 540 0.65 0.75 720 0.70 0.85 e. Assume 240 days has passed since the initiation of the currency swap contract. The new exchange rate is US$0.85/C$. Assume that, on Day 180, the 180-day C$ and U.S.$ LIBORs remained the same, at 0.5% and 0.55%, respectively. Calculate the value of the swap given the following LIBOR term structures at time 240. Days C$ LIBOR (%) US$ LIBOR (%) 120 0.60 0.60

A Canadian corporation (ACC) has just entered into a two-year currency swap contract with Big Dealer Bank (BDB). The swap contract requires ACC to make semi-annual payments in Canadian dollars (C$) and receive semi-annual payments in U.S. dollars (US$). The notional amount in Canadian dollars is C$25 million. The accrual period for the swap is 180/360, assuming 360 days per year. The US$/C$ spot exchange rate is 0.77, with the Canadian dollar being the domestic currency for ACC. The term structures of C$ LIBOR and US$ LIBOR are as follows: Days C$ LIBOR (%) US$ LIBOR (%) 180 0.50 0.55 360 0.60 0.65 540 0.65 0.75 720 0.70 0.85 e. Assume 240 days has passed since the initiation of the currency swap contract. The new exchange rate is US$0.85/C$. Assume that, on Day 180, the 180-day C$ and U.S.$ LIBORs remained the same, at 0.5% and 0.55%, respectively. Calculate the value of the swap given the following LIBOR term structures at time 240. Days C$ LIBOR (%) US$ LIBOR (%) 120 0.60 0.60

International Financial Management

14th Edition

ISBN:9780357130698

Author:Madura

Publisher:Madura

Chapter10: Measuring Exposure To Exchange Rate Fluctuations

Section: Chapter Questions

Problem 2ST

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