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Currency Swap and Spot Exchange Rate

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?

Solution Summary

This solution converts the million dollars equivalent into Yen and determines the interest payable annually.