Suppose that you are a swap bank and you notice that interest rates on coupon bonds are as shown. Develop the 3-year bid price of a euro swap quoted against flat USD LIBOR. The current spot exchange rate is $1.50 per €1.00. The size of the swap is €40 million versus $60 million. In other words, what you be willing to pay in euro against receiving USD LIBOR?
A)7%
B)6%
C)5%
D)None of the above

Question

Suppose that you are a swap bank and you notice that interest rates on coupon bonds are as shown. Develop the 3-year bid price of a euro swap quoted against flat USD LIBOR. The current spot exchange rate is $1.50 per €1.00. The size of the swap is €40 million versus $60 million.  In other words, what you be willing to pay in euro against receiving USD LIBOR?
A)7% 
B)6% 
C)5% 
D)None of the above

Quizplus · Accepted Answer

The Answer of Suppose that you are a swap bank and you notice that interest rates on coupon bonds are as shown. Develop the 3-year bid price of a euro swap quoted against flat USD LIBOR. The current spot exchange rate is $1.50 per €1.00. The size of the swap is €40 million versus $60 million.  In other words, what you be willing to pay in euro against receiving USD LIBOR?
A)7% 
B)6% 
C)5% 
D)None of the above

Suppose That You Are a Swap Bank and You Notice