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What are the cash flows for the swap

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All rates in this question are quoted with quarterly compounding. You are in Mexico, and have just set up a currency swap between Mexican Pesos (MXN) and US dollars (USD), with principal MXN 100 million. The swap entails paying 4% MXN, and receiving 0.6% USD, quarterly, for five years. The exchange rate is USD 1=MXN 20. (a) What are the cash flows for the swap? (b) 25 months later, the yield curve in Mexico is flat at 5%, while the yield curve in the US is flat at 1%. The exchange rate is USD 1 = MXN 19. What is the swap worth to you (in MXN)?

Reference no: EM133004966

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