Individual Homework-4

Individual Homework-4 - 2. DETERMINE THE MARKET VALUE OF...

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2. DETERMINE THE MARKET VALUE OF THE SWAP Suppose that one year after the inception of the currency swap between Centralia Corporation and the Spanish MNC, the U.S. dollar fixed rated has fallen from 8 to 6 percent and the euro zone fixed rate for euros has fallen from 6 to 5.5 percent. Further assume that the dollar depreciated versus euro, instead of \$1.33/€1.00 as given, it is now \$1.3343/€1.00. Table 14.3: CALCULATION THE MARKET VALUE OF THE SWAP The market value of the U.S. dollar debt The market value of the euro debt Year I d FV cp \$ FV cp (1+ I d ) t-1 \$ Year I d FV cp FV cp (1+ I d ) t-1 0 0 1 1 2 6.00% 232,000 218,867.92 2 5.50% 130,827 124,006.64 3 6.00% 232,000 206,479.17 3 5.50% 130,827 117,541.83 4 6.00% 232,000 194,791.67 4 5.50% 130,827 111,414.06 5 6.00% 232,0 00 183,765.7 3 5 5.50% 130,827 105,605.7 4 6 6.00% 232,000 173,363.90 6 5.50% 130,827 100,100.2 3 7 6.00% 232,0 00 163,550.8 5 7 5.50% 130,8 27 94,881.74 8 6.00% 3,120,0 00 2,074,978.1 9 8 5.50% 2,311,2 78

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Individual Homework-4 - 2. DETERMINE THE MARKET VALUE OF...

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