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Assume that under the terms of a cross-currency-interest-swap which is between Qantas and General Motors and arranged by us (the bank) the following: the notional principal is $100,000,000 (AUD) for six years, and the exchange rate is 1 USD is equal to 1.34 AUD at the time the contract was initiated. We the bank require a fee of 0.10% per annum. Qantas has agreed to pay 6-month LIBOR+1.95% per annum (annual compounding) in USD and to receive 3.9% per annum (annual compounding) in AUD with semi-annual payments. Assume that the swap has 19 months remaining until maturity and the exchange rate at this time is that 1 USD is worth AUD 1.355. Assume that the AUD interest rate is 2.22% per annum and the USD interest rate is 1.55% per annum with continuous compounding for all maturities. The 6-month LIBOR rate five months ago was 2.95% per annum. Calculate the value of the swap to Qantas (i.e., in AUD)

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92062900

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