Individual Homework-6

# Individual Homework-6 - Equivalent of currency swap debt...

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Equivalent of currency swap debt service obligation By comparison, the Spanish MNC is borrowing at a rate of 6 percent (€130,827 per year) but paying 8 percent (\$232,000). Centralia receives the \$232,000 and pays only €130,827. This comparison is latent with an ailing appreciation for international parity relationship. The equivalency of currency swap is calculated in Table 3. Table 14.4: EQUIVALENT OF CURRENCY SWAP CASH FLOW N o Items Time of cash flow 0 1 2 3 4 5 6 7 8 AIC 1 € debt cash flow 2,180,451 -130,827 -130,827 -130,827 -130,827 -130,827 -130,827 -130,827 -2,311,278 6% 2 \$ debt cash flow 2,900,000 -232,000 -232,000 -232,000 -232,000 -232,000 -232,000 -232,000 -3,132,000 8% 3 Contractu al FX rate 1.33 1.7 7 1.77 1.77 1.77 1.77 1.77 1.77 1.355 NA 4 Implicit FX rate 1.33 1.355 1. 38 1. 41 1. 43 1. 46 1. 49 1. 52 1.54 NA 5 Indifferen ce € cash flow 2,180,451 -171,206 -168,035 -164,924 -161,869 -158,872 -155,930 -153,042 -2,027,809 6% 6 Indifferen ce \$ cash flow 2,900,000 -177,283 -180,628 -184,036 -187,508 -191,046 -194,651 -198,324

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Individual Homework-6 - Equivalent of currency swap debt...

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