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"

Question

Quizplus · Accepted Answer

ABC Corp. pays interest on the yen loan. The loan amount in yen is $5 million * 105 = 525 million yen. The annual interest payment at 12% is 525 million yen * 0.12 = 63 million yen.

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