CAS Exam 9 Spring 2015, Question 9
Study guide: Exam 9
A company entered into a 10-year currency swap.
Given the following information:
- The company receives 10% per annum in Mexican Pesos.
- The company pays 6% per annum in US Dollars.
- LIBOR = 5.0% United States Dollar (USD).
- LIBOR = 8.0% Mexican Peso (MXN).
- LIBOR Rates are per annum with continuous compounding.
- The principals are 10 million in US Dollars and 120 million in Mexican Pesos.
There are four years left on the swap and the current exchange rate is 1 USD to 11.5 MXN.
Determine the value of the swap in US Dollars.
Part a (2 points)
No current syllabus covers this question; it is kept for the record.
Answer this question and see the worked solution