A Canadian corporation ( ACC ) has just entered into a two – year currency swap contract with Big Dealer Bank ( BDB ) . The swap contract requires…

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A Canadian corporation ( ACC ) has just entered into a two – year currency swap contract withBig Dealer Bank ( BDB ) . The swap contract requires ACC to make semi-annual payments inCanadian dollars ( Cq ) and receive semi- annual payments in U . S . dollars ( US ) . The nationalamount in Canadian dollars is C$25 million . The accrual period for the swap is 180 / 360assuming 360 days per year . The Us / C $ spot exchange rate is 0 . 77 , with the Canadiandollar being the domestic currency for ACC . The term structures of Of LIBOR and USLIBOR are as followsDaysC$ LIBOR ( 10 ) USS LIBOR ( / 0 )0.500.553600. 500 655400 .650 . 75120D . 700 85What is the value of the currency swap at the time of contract initiation ? ( I mark )Assume 240 days has passed since the initiation of the currency swap contract . Thenew exchange rate is US$0 85 / C . Calculate the value of the swap given thefollowing LIBOR term structures at time 240 . ( 8 marks )DaysC$ LIBOR ( 10 ) USS LIBOR ( / 0 )0609. 603000700.654809. 90Q.TO6600.900.80

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