Loan outstanding with a japanese bank

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Reference no: EM133118552

TNB has a 10-year, ¥50 million loan outstanding with a Japanese bank.

The ¥en loan has a 2.5%annual interest rate. The loan was taken 5 years ago and so has 5 more years to go.

Daibochi, a Japanese plastics maker with operations in Malaysia has just negotiated a RM5million, 5-year loan with Maybank at 7.5% annual interest.

Both companies are worried about foreign exchange exposure. Design a currency swap that will enable both companies to manage exchange rate risk. Assume debt servicing will be on 6-monthly basis, the spot ¥en/Ringgit rate is 10¥/Ringgit.

Reference no: EM133118552

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