The Present Value of the Series of Dollar Payments in a Currency

question 8

Multiple Choice

The present value of the series of dollar payments in a currency swap per $1 notional amount is $0.03.The present value of the series of euro payments in the same currency swap per €1 is €0.0225.The current exchange rate is $1.05 per euro.If the swap has a notional amount of $100 million and €105 million,find the market value of the swap from the perspective of the party paying euros and receiving dollars.

• A)$519,375
• B)-$2,480,625
• C)$3,000,000
• D)-$3,000,000
• E)-$519,375

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Definitions:

Accept

To agree to receive or undertake something offered.

Payee

A payee is the individual or entity to whom a payment is made, typically named or designated in a financial transaction document.

Negotiation

The transfer of a negotiable instrument in such form that the transferee becomes a holder.

Indorsement

The act of signing one's name on the back of a check or other negotiable instrument to legally transfer its ownership.