The writer is very fast, professional and responded to the review request fast also. Thank you.
In preparing the company’s financial statements, ALTECO’s accountants are faced with valuing the company’s positions in three currency and interest rate swaps.
Swap A:
ALTECO pays 3% p.a. (s.a. compounding) on a principal of US$450m and receives 4% p.a. (s.a. compounding) on a principal of £250 million. Cash flows are exchanged semi-annually and it is exactly six months to the next swap payment date. The swap has eighteen months to run.
Swap B:
ALTECO pays 3.5% p.a. (s.a. compounding) on a principal of US$600m and receives six-month sterling LIBOR on a principal of £400 million. Cash flows are exchanged semi-annually and it is exactly six months to the next swap payment date. The swap has two years to run.
Swap C:
ALTECO pays six-month sterling LIBOR on a principal of £350 million and receives six-month US dollar LIBOR on a principal of US$500 million. Cash flows are exchanged semi-annually and it is exactly six months to the next swap payment date. The swap has three years to run.
The current exchange rate for sterling is £1 = US$1.60 and the LIBOR/swap term structures in the UK and US are as follows (all rates continuously compounded):
Required
(a) Use the zero coupon valuation method to value the three swaps to ALTECO in US dollars.1 (16 marks
(b) Calculate the duration of Swap C from ALTECO’s perspective. Briefly explain your answer.
(4 marks)
Show more
Delivering a high-quality product at a reasonable price is not enough anymore.
That’s why we have developed 5 beneficial guarantees that will make your experience with our service enjoyable, easy, and safe.
You have to be 100% sure of the quality of your product to give a money-back guarantee. This describes us perfectly. Make sure that this guarantee is totally transparent.
Read moreEach paper is composed from scratch, according to your instructions. It is then checked by our plagiarism-detection software. There is no gap where plagiarism could squeeze in.
Read moreThanks to our free revisions, there is no way for you to be unsatisfied. We will work on your paper until you are completely happy with the result.
Read moreYour email is safe, as we store it according to international data protection rules. Your bank details are secure, as we use only reliable payment systems.
Read moreBy sending us your money, you buy the service we provide. Check out our terms and conditions if you prefer business talks to be laid out in official language.
Read more