D&R A3 2 - 5 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 0.85 240 days has passed since the initiation of the currency swap contract. The new exchange rate is US$0.85/C$. Day 180, the 180-day C$ and U.S.$ LIBORs remained the same, at 0.5% and 0.55%, respectively. LIBOR term structures at time 240: Days C$ LIBOR (%) US$ LIBOR (%) 120 0.60 0.60 300 0.70 0.65 480 0.80 0.70 660 0.90 0.80 What is the value of the swap?
D&R A3
2 - 5
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 |
240 days has passed since the initiation of the currency swap contract.
The new exchange rate is US$0.85/C$.
Day 180, the 180-day C$ and U.S.$ LIBORs remained the same, at 0.5% and 0.55%, respectively.
LIBOR term structures at time 240:
|
Days |
C$ LIBOR (%) |
US$ LIBOR (%) |
|
120 |
0.60 |
0.60 |
|
300 |
0.70 |
0.65 |
|
480 |
0.80 |
0.70 |
|
660 |
0.90 |
0.80 |
What is the value of the swap?
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