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Hi John,
i have a question in one of the exercise that i’m solving for the forex swap
in the question it says that ‘ currency spot rate is 28 escudos(foreign currency) to the krown(domestic currency) and the bank has offered a forex swap at 22 escudos/krown with Goldsmith(domestic company) making a net interest payment to the bank of 1% in krowns ( assume at T1)’
Then in the answer sheet ( for calculating with the forex swap), when they buy the foreign currency escudos before swapping back, don’t we suppose to use 28 the spot rate ? since 22 is literally for the swapping the foreign currency
(by the way in the answer sheet, it says that they buy escudos with 22 and swap back with 22, and i don’t understand why they buy escudos with 22)
I can only really help if I can see the question.
Assuming it is a past exam question, please tell me which exam and which question. (Or if it is in the BPP Revision Kit then tell me the name of the question.)It’s kaplan textbook chapter 10 page 383 test your understanding 6, goldsmith
I am afraid that I do not have the Kaplan books and so I can’t help any more.
As a more general point, do make sure you get on to the Exam Kit (Revision Kit) as soon as possible, because the questions there are all either past exam questions (or exam standard) and they are far more important to practice.
(From my own experience in the past, some of Kaplans TYU questions are brilliant, but others are confusing and not always particularly exam relevant).
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