Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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The initial investment of SGD 20,000,000 can be financed using a bank loan at an interest rate of 7.75%. The CFO knows a colleague of a Singaporean company that wants to invest in the United States. The USD amount is 10,000,000. The two CFOs are considering a currency swap to gain an arbitrage profit.
The following data is available:
Interest SGD Interest USD
SGD company 8.50% 5.75%
USD company 7.75% 5.50%
Determine whether a beneficial currency swap between the two companies is possible..
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