(Solution) - Suppose a U S company enters into a currency swap with -(2025 Original AI-Free Solution)

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Suppose a U.S. company enters into a currency swap with a counterparty in which the U.S. company pays a fixed rate of 5 percent in euros and the counterparty pays a fixed rate of 6 percent in dollars. The notional principals are $50 million and ?45 million. The spot exchange rate is ?0.90 per dollar. Payments are made semiannually on the basis of 30 days per month and 300 days per year
a. Calculate the initial exchange of payments that takes place at the beginning of the swap if the parties have no immediate need for each other's currency.
b. Indicate how to calculate the semiannual payments.
c. Indicate how to calculate the final exchange of payments that takes place at the end of the swap.
d. Describe a scenario in which the U.S. Company might wish to enter into this currency swap.