NAB Issue 90-Day Commercial Paper in the US Market at 2.5

question 84

Essay

NAB issue 90-day commercial paper in the US market at 2.5% with a face value of USD10 million.They hedge their FX exposure with an FX swap.(Use a 360-day year for the US, but assume simple interest calculations.)
(a)If the spot rate is AUD/USD0.9800, and interest rates in Australia are 6%, calculate the forward rate component of the FX swap.(b)Calculate the AUD proceeds from the paper issue and the AUD amount required at maturity.(c)Demonstrate the effective interest rate is the local AUD rate.

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