Business, 26.02.2020 03:19 wshemekia3oyliv4

Suppose that the term structure of interest rates is flat in the United States and Australia. The USD interest rate is 7% per annum and AUD rate is 9% per annum. The current exchange rate is 0.62USD/AUD. In a swap agreement, a financial institution pays 8% per annum in AUD and receives 4% per annum is USD. The principles in the two currencies are $12 million USD and $20 AUD. Payments are exchanged every year, with one exchange having just taken place. The swap will last two more years. Assume all interest rates are continuously compounded. What is the today's value of swap to the financial institution (in millions of dollars)? The answer is 0.795. I want to know the process.

Answers: 2

Show answers

Another question on Business

Business, 22.06.2019 01:50

Amanda rice has just arranged to purchase a $640,000 vacation home in the bahamas with a 20 percent down payment. the mortgage has a 7 percent apr compounded monthly and calls for equal monthly payments over the next 30 years. her first payment will be due one month from now. however, the mortgage has an eight-year balloon payment, meaning that the balance of the loan must be paid off at the end of year 8. there were no other transaction costs or finance charges. how much will amanda’s balloon payment be in eight years

Answers: 3

Answer

Business, 22.06.2019 06:40

After the 2008 recession, the amount of reserves in the us banking system increased. because of federal reserve actions, required reserves increased from $44 billion to $60 billion. however, banks started holding more reserves than required. by january 2009, banks were holding $900 billion in excess reserves. the federal reserve started paying interest on the excess reserves that the banks held. what possible impact will these unused reserves have on the economy?

Answers: 1

Answer

Business, 22.06.2019 07:40

Alicia has a collision deductible of $500 and a bodily injury liability coverage limit of $50,000. she hits another driver and injures them severely. the case goes to trial and there is a verdict to compensate the injured person for $40,000 how much does she pay?

Answers: 1

Answer

Business, 22.06.2019 10:30

Describe three scenarios in which you might utilize mathematics to investigate a crime scene, accident scene, or to make decisions involving police practice. be sure to explain how math is used in police as they work through each scenario.

Answers: 1

Answer

You know the right answer?

Suppose that the term structure of interest rates is flat in the United States and Australia. The US...

Questions

Business, 02.08.2019 10:20

The money gained from taking a business venture risk is called a. pmi. b. cpm. c. roi. d. apr....