ABC Corp.entered into a currency swap with its bank, providing that ABC borrows $5 million at 10 percent and swaps for a 12 percent yen loan.The spot exchange rate is ¥105/$.If interest only is to be repaid on an annual basis, how much does ABC pay annually to the bank? (answer in millions)
A)¥1.26 million
B)¥5.71 million
C)¥52.50 million
D)¥63.00 million

Question

Quizplus · Accepted Answer

ABC pays 12 percent on a yen loan equivalent to $5 million. At the spot exchange rate of ¥105/$, $5 million is ¥525 million (5 million * 105). 12 percent of ¥525 million is ¥63 million annually.

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