X an indian company wishes to borrow usd at fixed rate. Y, a us company wishes to borrow in indian rupee. The principal amount is $10 million and the current exchange rate js rs 69. They have been quoted the following rate of interest per annum for a 3 year loan. INR USD company X 8.5%. COMPANY Y. 10%. 6.5% 7.3% Design a swap that will nwt the swap dealer 10 basis points per annum and aplit the net advantage between company X and Y in the ratio of 2:1. Show the cash flow to company X, company Y and the swap dealer over the lift of the swap.
X an indian company wishes to borrow usd at fixed rate. Y, a us company wishes to borrow in indian rupee. The principal amount is $10 million and the current exchange rate js rs 69. They have been quoted the following rate of interest per annum for a 3 year loan. INR USD company X 8.5%. COMPANY Y. 10%. 6.5% 7.3% Design a swap that will nwt the swap dealer 10 basis points per annum and aplit the net advantage between company X and Y in the ratio of 2:1. Show the cash flow to company X, company Y and the swap dealer over the lift of the swap.
Chapter8: Relationships Among Inflation, Interest Rates, And Exchange Rates
Section: Chapter Questions
Problem 44QA
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