D&R A3 2-2 A Canadian corporation (ACC) has just entered into a two-year currency swap contract with Big Dealer Bank (BDB). The swap contract requires ACC to make semi-annual payments in Canadian...

D&R A3

2-2

A Canadian corporation (ACC) has just entered into a two-year currency swap contract with Big Dealer Bank (BDB).

The swap contract requires ACC to make semi-annual payments in Canadian dollars (C$) and receive semi-annual payments in U.S. dollars (US$).

The notional amount in Canadian dollars is C$25 million.

The accrual period for the swap is 180/360, assuming 360 days per year.

The US$/C$ spot exchange rate is 0.77, with the Canadian dollar being the domestic currency for ACC.

The term structures of C$ LIBOR and US$ LIBOR are as follows:

What is the fixed rate, in Canadian dollars?