Reference no: EM132540869

Consider a five-year currency and interest rate swap, whereby A receives annual payments on Australian dollars and based on a floating interest rate, and B receives annual payments on New Zealand dollars based on a fixed interest rate. The notional involved is AUD100000, the fixed rate is 6 per cent, and he contracted exchange rate is 1.18 (NZD/AUD). If on each payment date, the floating interest rate assumes the values 8.25, 9.75, 5.50, 4.75 and 6 per cent, respectively, and the market exchange rate assumes the values 1.25, 1.15, 1.10, 1.30 and 1.18, then determine the payments made by A to B, and vice versa, and hence the net payments, all in AUD, for the first 3 years (3-periods) of the swap contract.

You are given the following information: Quantity of exports 600 Domestic currency price of exports 15 Exchange rate (d/f) 1.25 . Calculate the domestic and foreign currency currency values of exports. What will happen if the exchange rate falls to 1.10, assuming that the value of the elasticity of demand for exports is -0.2? Provide your final answers to 2 decimal points.