ABC CorpEntered into a Currency Swap with Its Bank,providing That ABC

question 53

Multiple Choice

ABC Corp.entered into a currency swap with its bank,providing that ABC borrows $5 million at 10% and swaps for a 12% yen loan.The spot exchange rate is *105/$.If interest only is to be repaid on an annual basis,how much does ABC pay annually to the bank?

• A) "*1.26 million"
• B) "*105.71 million"
• C) "*52.50 million"
• D) "*63.00 million"

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Definitions:

Par Value

The face value of a bond or stock as specified by the corporate charter, which is the minimum amount per share that shareholders will receive in the event of the corporation's liquidation.

Market Rate

The current price or cost of goods, services, or commodities as determined by the market supply and demand.

Maturity

The date on which a financial obligation must be repaid in full or the point at which an investment reaches its full value.

Time Period

A specific duration for which financial or operational activities are measured, analyzed, and reported.