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Schweser currency swap question
P236 Q710
Consider a 3year annual currency swap that takes place between a foreign firm(FF) with FC currency units and a United States Firm (USF) with $ currency units. USF is the fixedrate payer and FF is the floating rate payer. The fixed interest rate at the initiation of the swap is 7%, and 8 % at the end of swap. The variable rate is 5% currently; 6% at the end of year1;8% at the end of year 2; and 7% at the end of year 3. At the beginning of the swap, $1.0 million is exchanged at an exchange rate of FC2.0=$1.0. At the end of the swap period the exchange rate is FC 1.5=$1.0.
NOTE: with this currency swap, endofperiod payments are based on beginning of period interest rates.
8. at the end of year 2. USF pays FC 140,000; FF pays $ 60,000
How can you get this answer? I feel confused about the explanation( the currency swap is pay floating on dollars and pay fixed on foreign. Floating at the end of year 1 is 6% of $1.0 million. Since payments are mande in arrears. FF pays $ 60,000 and USF pays FC 140,000 at the end of year 2.
What I found in questinon is USF is the fixedrate payer and FF is the floating rate payer.
So I think USF fixedrate corresponds to 7%,8%; FF floating rate corresponds to 6%,8%,7%. Since it is totally diffent from answers.
10. at the end of year3, FF will pay 1,080,000. how can we get 80,000 at year 3?
in all, I totally lost in this question. Can anyone help me to give a detail explaination at Q710? I want to find out the process how it swap.
Thanks. |
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发表于 2013-4-8 21:50
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