Hi, i am kind of confused on how the gain on currency swap is calculated? why do we not dedcut the swap fee cost to get the gain? why cant i multiply our savings by the difference in exchange rate to get the gain?
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Buryecs (Mar/Jun 17)
Also would we have to make this gain net of tax if a tax rate was given?
4y ago#2For part (b)(1) the swap fee has been taken into account.
If you had brought in the fee for part (b)(ii) then you would still have got the marks.
Effectively the answer to (b)(ii) is multiplying the savings each year by the difference in the exchange rate,
A question would make it clear whether or not it was the gain net of tax that was required, if there was tax involved.
then wouldnt savings in each year have to be multiplied by the annuity factor? not the PV factor?
can i just calculate the NPV without any currency swap and then NPV with currency swap and find the gain?
4y ago#5If the savings each year were an equal amount then using the annuity factor give the same result as discounting each year individually.
And yes to your second question.
Alright thank you sir
4y ago#7You are welcome :-)
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