Question

Walmart Corp. enters into a currency swap with a dealer in which it pays a fixed rate in euros, and the dealer pays a fixed rate in U.S. dollars. The notional principals are $385 million and €350 million (equivalent in value at the current exchange rate of $1.1 per euro.) The fixed rates are 4.8% in dollars and 5.2% in euros. Payments are made semiannually on the basis of 180/360. Semiannually:

Question 17 options:

	Walmart makes interest payment of €18.2 million and receives interest payment of $18.48 million.
	Walmart makes payment of $385 million and receives €350 million.
	Walmart makes interest payment of $9.24 million and receives interest payment of €9.1 million.
	Depending on the exchange rate of the euros at settlement dates, Walmart and the dealer will exchange the netted interest amounts only.
	Walmart makes interest payment of €9.1 million and receives interest payment of $9.24 million.

Question 18 (2.5 points)

You purchase a put option on Swiss francs with an exercise price of $.91 for a premium of $0.02. Currently, the spot rate is $1.03 per franc. The option's intrinsic value is:

Question 18 options:

	$0
	-$0.02
	$0.91
	$0.12
	-$0.12

Question 19 (2.5 points)

Two parties agree to a currency forward contract for €1 million at $1.05 per euro. At contract expiration, the euros trade at $1.07 per euro. In a cash-settlement forward contract, the:

Question 19 options:

	shorts pays the long $0.02 million.
	long pays the short $1.07 million.
	short pays the long $1.05 million.
	long pays the short $0.02 million.
	long pays the short $1.05 million.

Answer 1

For any query or clarification, please leave a comment.