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
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- Question 1 You are considering uncovered interest arbitrage between the pound (GBP) and the US dollar (USD). The following data is available to you: Funds available: 2 million GBP Spot exchange rate: 1.40 USD per GBP Spot exchange rate one year ago: 1.26 USD per GBP USD 3 month interest rate: 2.32% GBP 3 month interest rate: 0.75% a) Calculate the profit that would be made if the exchange rate remains at its current level in 3 months' time. b) How would the profit figure change if the US dollar continues to weaken at the same rate as it has done over the previous year?unc.3 Your company can get yen loans for 2.0%. Dollar rates on the same loans are 4.5%. The spot yen per dollar exchange rate is 104. The forward rates for years 1 thru 4 are, 101.51, 99.08, 96.71, and 94.40, respectively. What is the present value of the market-maker's net cash flow if spot rates are 102 instead? A) $188.59 B) $206.43 C) $219.96 D) $242.06Tyson Inc. wants to hedge an account receivable of ¥595 million to be received in six months using a money market hedge. Given a yen borrowing rate of 6% APR how much will Tyson Inc. need to borrow today in order to match the payment it will receive in six months? Question 7 options: ¥577.7 million ¥595 million ¥561.3 million ¥586.2 million
- Question 5: Assume that You are risk manager at BIC Investment. BIC fırm wants to fix currency rate for 5.000.000 USD export transaction in 120 days and 3.000.000 EURO import transaction in 180 days from AC Bank. Find bid and ask forward rate of AC Bank by using exchange rates and interest rates below. USD/TL: 13,3725/13,9850 USD interest rate: 0,50/1,00 TL interest rate: 21.00/27,00 EURO/TL: 15,2700/15,4250 EURO interest rate: 1,25/2,50Finance The practice of investing in a currency that offers the higher return on a covered basis is known as covered interest arbitrage. Currently, the six month Euro Libor rate is -0.52% per annum, and the six month TR libor rate is 18.06% per annum. If the spot rate is 8.5013TRY per Euro and the forward rates are as stated below, Forward Points EURTRY 1M FWD 1003 EURTRY 3M FWD 3411 EURTRY 6M FWD 7096 EURTRY 1Y FWD 14507 a) What is 6M Forward rate for euro? b) Do you have a covered interest arbitrage opportunity? c) If yes, how? d) How much is the arbitrage amount you can enjoy if you can borrow upto 1 million euros or its equivalent Turkish Lira?DVR Inc. can borrow dollars for five years at a coupon rate of 2.84 percent. Alternatively, it can borrow yen for five years at a rate of .94 percent. The five-year yen swap rates are 0.73–0.70 percent and the dollar swap rates are 2.50–2.53 percent. The currency ¥/$ exchange rate is 87.620. 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:Provide accurate solution with explanation of all the requirements. Use excel calculations with excel formulas. Provide solution ASAP.
- QUESTION 3 (a) KL Co. will be paying USD100,000.00 in 60 days. Assume the following interest rates: U.S. Malaysia 360-day borrowing rate 360-day deposit rate 7% 6% 5% 4% Assume the forward rate of the USD is RM4.20 and the spot rate of the USD is RM4.15. If KL Co. uses a money market hedge, how much will KL Co. be paying in 60 days?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 workingnswered Today you observe the folowing quotes: Spot EURUSD= $1.14 60 Day Forward EURUSD = $1.04 In 60 day you expec to receive 447,014 Euros. In 60 days you expect the EURUSD exchange rate to be $1.23. In 60 days the EURUSD actually is $1.03. You decided to not hedge your receivables. How many USD will you receive? 433,994.17
- Problem 3.8. Discount rate and investment rate ber 16, Nepal Rastra Bank accepted a bid of 98.2 on a Treasury bill issue. What discount rate would be published on this Treasury bill? What is the annual interest rate on this bill that would make it comparable to rates quoted on bonds? Now suppose that after 10 days of T-bills issued, the discount rate increased to 11.5 percent. At what price will the Treasury bill be selling when it has 50 days remaining to maturity? 10.000Exercise 2 (LO 2) Spot rates and forward rates. On January 1, one U.S. dollar can be exchanged for eight foreign currencies (FC). The dollar can be invested short term at a rate of 4%, and the FC can be invested at a rate of 5%. 2. Calculate the 180-day forward rate to buy FC (assume 365 days per year).5. A U.S. firm expects a receivable (cash inflow) of €1,000,000 in six months. The current exchange rate is $1.125/€. Firm wants to sell euros in six months (to convert the inflow into dollars). Consider 3 possible spot prices in six months. 1. $1.195/€ 2. $1.100/€ 3. $1.025/€ What kind of option, put or call, is appropriate to hedge with? In each scenario, what is the total amount of the firm's NET receivable? NET receivable implies you should consider the receivable as well as the hedging costs of buying the option. (Assume an option exercise price of $1.130/€ and option premium of $.016/€) | 1. 2. 3.