What will the payments of the swap be

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Reference no: EM131622891

All rates in this question are quoted with annual compounding. You are based in Japan. You have entered into a five year US dollar to Japanese Yen swap. The notional principal is $5 million. You will be making 8% annual Yen payments in exchange for receiving 6.5% annual US dollar payments. The current exchange rate is USD 1 = JPY 100.

(a) What will the payments of the swap be?

(b) Eighteen months later, the LIBOR yield curve in the US is flat at 7%, while the Japanese LIBOR curve is flat at 8.2%. Meanwhile the exchange rate has moved in the US's favor so that USD 1 = JPY 105, what is the value of the swap to you, in Yen?

Reference no: EM131622891

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