Design a currency swap strategy that would achieve objective

Reference no: EM13925901

The U.K. manager of an international bond portfolio would like to synthetically sell a large position in a French government bond, de-nominated in euros. The bond is selling at its par value of €46.15 million, which is equivalent to £30 million at the current exchange rate of £0.65. The bond pays interest at a fixed rate of 5.2 percent annually for 10 years. The manager would like to sell the bond and invest the pro- ceeds in a pound-denominated floating-rate bond. Design a currency swap strategy that would achieve the desired objective and identify the payments that would occur on the overall position, which includes both the French bond and the swap. The fixed rates on the currency swap are 4.9 percent in pounds and 5.7 percent in euros.

Reference no: EM13925901

Questions Cloud

Starbucks entering the italian market : Starbucks is a company that received its inspiration from an Italian custom, with thriving store locations all over the world, except in Italy, one has to wonder what is the hold up? Entering into the Italian market could be a very risky move sinc..

Explain how the bank would use a swap to achieve objective : It would like to use a swap to synthetically alter the payments on the loan it holds. The rate it could obtain on a plain vanilla swap is 7.25 percent. Explain how the bank would use a swap to achieve this objective.

Get special windshield wipers installed : The state of California is requiring all commercial trucks to get special windshield wipers installed at a price of $1,000 a pop. It's supposed to increase safety, but this has not been fully proven. Trucks will have to go around the state to avoi..

Would inflatation still be considerd as a problem : suppose all wages, salaries, welfare benefits, and other sources of income were indexed to inflatation. Would inflatation still be considerd as a problem? Why or why not?

Design a currency swap strategy that would achieve objective : Design a currency swap strategy that would achieve the desired objective and identify the payments that would occur on the overall position, which includes both the French bond and the swap.

Bims situation as an overview-problem : Present the BIMS situation as an overview-problem, purpose, research questions, and hypotheses. Describe the instrument used for data collection. Identify types of data collected-quantitative, qualitative, or both-and how the data is collected.

Calculate the standard error of the estimate : A) Predict the final score if the person obtains a third exam score of 68. B) Calculate the standard error of the estimate.

What is the net effect on the monetary base : Suppose the Fed buys $100 million worth of Euros with U.S. currency and, at the same time, sells $100 million of U.S. government securities for U.S. currency in a domestic open market operation. What is the net effect on the monetary base? How has..

Which are based on the three different types of cash flows : Assume the role of a swap dealer and present three possible equity swap proposals, which are based on the three different types of cash flows that could be paid against payment of the return on the stock.

User Account

All Pages