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Falcor enters into a $50 million 7-year cross currency interest rate swap to pay euros and receive dollars.

Notional principal: $50,000,000 Spot exchange rate, $/€ : 1.16 US dollar swap rate 7 year bid: 5.86% US dollar swap rate 7 year ask: 5.89% Euro swap rate 7 year bid: 4.01% Euro swap rate 7 year ask: 4.05% a) Calculate all principal and interest payments in both currencies for the life of the swap b)Three years later Falcor decides to unwind the swap agreement. If 4-year fixed rates of interest in euros have now risen to 5.35%, 4-year fixed rate dollars have fallen to 4.40%, and the current spot exchange rate is $1.02/€, what is the NPV of the swap agreement? I got the answers for a, but don't know how to calculate the PV of remaining dollar cash inflows in b.

Answers

Barrett Peterson
Title: Senior Manager, Actg Stnds & Analysis
Company: TTX
(Senior Manager, Actg Stnds & Analysis, TTX) |

Sounds like homework, which we do not do here.

Anonymous
(student) |

It was not a homework, but a study question for my exam for which I had the solutions but not the way how to calculate it. As I mentioned in my last posting, I did solve a, just had difficulties with part b so i did not want anybody to do any homework for me! However, this is not relevant anymore..

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