Currency and Interest Rate Swaps
Japanese investors purchased from Walt Disney Productions projected yen royalties. The 20-year beck of royalties is for Tokyo Disneyland. The present bulk of that beck of royalties, discounted at 5 percent (the acknowledgment appropriate by the Japanese investors), was ¥95 billion. Disney took the yen gain from the sale, adapted them to dollars, and invested the dollars in bonds acquiescent 8 percent. At the time of the sale, the barter bulk was ¥79.8408 = $1.
What bulk (in dollars) did Disney apprehend from the auction of its yen proceeds?
Describe the similarities and differences amid Walt Disney's transaction and a currency/interest bulk swap.
Coca-Cola is because entering into a bill bandy involving $14 actor of U.S. debt for an agnate bulk of euro debt. Assuming the bandy matures in 10 years, the absorption bulk on Pfizer's outstanding 8-year dollar debt is 8% (paid semi-annually), the absorption bulk on the euro debt is 6 percent (paid semi-annually), and the accepted atom barter bulk is $1.24/€; anatomy a bandy for Coca-Cola.
IBM wants to bandy out of $10,000,000 of anchored absorption bulk debt and into amphibian absorption bulk debt for 3 years. Assume the anchored absorption bulk is 7.625 percent and the amphibian bulk is dollar LIBOR. What semiannual absorption payments will IBM accept and what will IBM pay? (Hint: A table of absorption paid and accustomed by IBM and the banking academy will help).
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