A US-Based Investor Enters into an Unhedged Cross-Currency Equity Swap $£$

A US-based investor enters into an unhedged cross-currency equity swap in which he pays returns on the S&P 500 index in dollars in exchange for receiving the returns on the FTSE 100 in pounds.At inception,the notional principal on the swap is $100 million,and the exchange rate is $1.60 = 1.Cash flows are exchanged every six months and the first six-month period has 182 days in it.At the end of the first six-month period,the raw returns on the S&P 500 are 8% and the raw returns on the FTSE 100 are 9%.The exchange rate at this point is $1.50 = 1.The investor's net cash flow on this first payment date is $£$

A) $-$
$1million.
B) $+$
0) 165 million.
C) $+$
0) 438 million.
D) $+$
1 million.

Correct Answer:

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