70 days ago, the mutual fund entered into a two-year currency swap by agreeing to swap US dollars for euros at the fixed
Posted: Sun May 29, 2022 4:27 pm
70 days ago, the mutual fund entered into a two-year currency
swap by agreeing to swap US dollars for euros at the fixed rates.
The annualized fixed rate in dollars and euros are 7.25% and 7.1%,
respectively. The exchange rate at the start of the swap was $0.78.
The new exchange rate today is $0.55. Assume that the notional
dollar amount is $25,000,000. The payments are made annually based
on the assumption of 30 days per month and 360 days in a year. The
adjustment of Current LIBOR and Euribor rates are shown below-
Term
LIBOR (%)
Euribor (%)
290 days
7.4
5.5
650 days
7.8
6.0
Determine the market value of the swap today from the
counterparty’s perspective, which pays euros and receives
dollars
swap by agreeing to swap US dollars for euros at the fixed rates.
The annualized fixed rate in dollars and euros are 7.25% and 7.1%,
respectively. The exchange rate at the start of the swap was $0.78.
The new exchange rate today is $0.55. Assume that the notional
dollar amount is $25,000,000. The payments are made annually based
on the assumption of 30 days per month and 360 days in a year. The
adjustment of Current LIBOR and Euribor rates are shown below-
Term
LIBOR (%)
Euribor (%)
290 days
7.4
5.5
650 days
7.8
6.0
Determine the market value of the swap today from the
counterparty’s perspective, which pays euros and receives
dollars