Assume Carlton enters into a three-year fixed-for-fixed swap agreement to receive Swiss Franc and pay U.S. dollar annually, on a notional amount of $4,000,000. The spot exchange rate at the time of the swap is SFO.8/$. Assume that one year into the swap agreement Carlton decides it wishes to unwind the swap agreement and settle it in dollars. Assuming that a two-year fixed rate of interest on the Swiss Franc is now 2.59%, and a two-year fixed rate of interest on the dollar is now 5.90%, and the spot rate of exchange is now SFO.0.893/$. To Carlton, what is the net present value (in dollar) of the swap agreement? (Keep the sign and two decimal places.)

Assume Carlton enters into a three-year fixed-for-fixed swap agreement to receive Swiss Franc and pay U.S. dollar annually, on a notional amount of $4,000,000. The spot exchange rate at the time of the swap is SFO.8/$. Assume that one year into the swap agreement Carlton decides it wishes to unwind the swap agreement and settle it in dollars. Assuming that a two-year fixed rate of interest on the Swiss Franc is now 2.59%, and a two-year fixed rate of interest on the dollar is now 5.90%, and the spot rate of exchange is now SFO.0.893/$. To Carlton, what is the net present value (in dollar) of the swap agreement? (Keep the sign and two decimal places.)

International Financial Management

14th Edition

ISBN:9780357130698

Author:Madura

Publisher:Madura

Chapter11: Managing Transaction Exposure

Section: Chapter Questions

Problem 2SBD

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