Version A FIN 536, 11S Page 1 of 1 Fin 536 – International Finance Quiz 3 NAME:______________________ Due Date: May 17, 2011 Answer All Questions. Read all the answers carefully and select the best answer for each question. Answer the next FIVEquestions based on the following information: At time = 0, you enter a 5-year swap agreement in that you pay $6% and receive SF3%. Notional principal is $100 million against SF130 million. At time =2, the swap dealer quotes a 3-year swap at $7% against SF4%. Exchange rate = 1.10 SF/$. 1.What could be the gain/lose from the principal repayment of the swap transaction if the exchange rate is 1.5 SF/$ at maturity? a)You will gain $13.33 million because $ appreciates against SF. b)You will lose $20 million because $ appreciates against SF. c)You will lose $13.33 million because $ appreciates against SF. d)You will gain $20 million because $ depreciates against SF. e)You will lose $13.33 million because $ depreciates against SF.
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