Problem DVR Inc. can borrow dollars for five years at a coupon rate of 2.87 percent. Alternatively, it can borrow yen for five years at a rate of 97 percent. The five-year yen swap rates are 0.76-0.70 percent and the dollar swap rates are 2.53-2.56 percent. The currency X/S exchange rate is 87.635. Determine the dollar AIC and the dollar cash flow that DVR Inc. would have to pay under a currency swap where it borrows 1,750,000,000 and swaps the debt service into dollars. Borrow Swap

Cray Research sold a supercomputer to the Max Planck Institute in Germany on credit and invoiced €11.00 million payable in six months. Currently, the six-month forward exchange rate is $1.15 per euro and the foreign exchange adviser for Cray Research predicts that the spot rate is likely to be $1.10 per euro in six months. Required: a. What is the expected gain/loss from a forward hedge? Note: A Negative value should be indicated with a minus sign. Do not round intermediate calculations. Round your final answer in whole dollars not in millions. b. If you were the financial manager of Cray Research, would you recommend hedging this euro receivable? c. Suppose the foreign exchange adviser predicts that the future spot rate will be the same as the forward exchange rate quoted today. Would you recommend hedging in this case? d. Suppose now that the future spot exchange rate is forecast to be $1.22 per euro. Would you recommend hedging? a. b. Would you recommend hedging this euro…

Finance Suppose two companies, Firm A and B, both wish to borrow $10 million for five years and have been offered the following rates firm A fixed rate 4%, firm A floating rate six month LIBOT -0.1% firm B, fixed 5.2% floating six months libor +0.6% Enter into a swap agreement to exchange interest-rate payments such that: – Firm A ends up with floating-rate funds. – Firm B ends up with fixed-rate funds. explain how much A and b have after a swap?With a swap, Firm A now pays LIBOR − 0.35% With a swap, Firm B now pays 4.95%. Explain how -0.35% and 4.95% are attained with proper working

Subject:- finance