A company borrows $220M for 5-years at 3%, but wants a Euro liability since its revenue comes mostly from Germany. The exchange rate is $1.10. The curren 5-year swap rate is $3.2% versus E3.1%. What is the net result for the company What would happen to the company if the swap counterparty fails at maturity, there is no collateral and the $/E FX rate moves to $1.15?
A company borrows $220M for 5-years at 3%, but wants a Euro liability since its revenue comes mostly from Germany. The exchange rate is $1.10. The curren 5-year swap rate is $3.2% versus E3.1%. What is the net result for the company What would happen to the company if the swap counterparty fails at maturity, there is no collateral and the $/E FX rate moves to $1.15?
Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter27: Multinational Financial Management
Section: Chapter Questions
Problem 7MC
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![A company borrows $220M for 5-years at 3%, but wants a Euro liability since
its revenue comes mostly from Germany. The exchange rate is $1.10. The curren
5-year swap rate is $3.2% versus E3.1%. What is the net result for the company
What would happen to the company if the swap counterparty fails at maturity,
there is no collateral and the $/E FX rate moves to $1.15?](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F0782c669-efca-4e11-aaaf-c84fe4abc59e%2F88cb7385-3b56-468f-82fd-bef1bd34904c%2Fjy33e2_processed.jpeg&w=3840&q=75)
Transcribed Image Text:A company borrows $220M for 5-years at 3%, but wants a Euro liability since
its revenue comes mostly from Germany. The exchange rate is $1.10. The curren
5-year swap rate is $3.2% versus E3.1%. What is the net result for the company
What would happen to the company if the swap counterparty fails at maturity,
there is no collateral and the $/E FX rate moves to $1.15?
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