## [answered] 1. Given the information in the table Bank Quotations Bid D

HELP WITH FINANCE HOMEWORK. ?I attached a file. It is about SWAP?

1. Given the information in the table

Bank Quotations

Bid

Deutsche Bank \$/?

\$1.9712/?

Credit Lyonnais \$/?

\$1.4738/?

Credit Agricole ?/\$

\$1.3310/ ?

\$1.9717/?

\$1.4742/?

\$1.3317/? Please note that your answers are worth zero points if they do not include currency symbol (\$/?)

(1) What are the ?No Arbitrage? spot exchange rates? (bid and ask)

(2) Do you find any arbitrage opportunity? If no, explain it. If yes, show the opportunity 2. Come up with a swap (exchange of interest and principal) for parties A and B who have the

following borrowing opportunities

? \$ A ?5% \$LIBOR% B ?6% \$LIBOR + ?% Company ?A? is in Milan, Italy and wishes to borrow U.S dollars at a floating rate and company ?B?

is a U.S firm that wants to borrow Euros at a fixed rate of interest. You are a swap dealer.

(1) Compute the QSD.

(2) Quote A and B a swap makes money for all parties and eliminates exchange risk for both A and B.

(Draw a figure)

(3) Show the profit/cost saving of each party (Company A, Company B, and the Swap Bank).

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This question was answered on: Sep 18, 2020

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