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4. A French wine maker is considering a currency swap that will call for the firm to pay dollars and receive Euros. The dollar notional principal will be $100 million. The swap calls for semiannual payments with a 180/360 adjustment. The current exchange rate is $1.60/ The term structure of the dollar and Euro LIBOR on the day of swap initiation is as follows # of days until payment | Dollar LIBOR ( Euro LIBOR 180 360 540 720 7.00 7.25 7.45 7.55 6.50 7.10 7.50 8.00 a. Determine the appropriate amount of Euro notional principal for this swap b. Determine the fixed interest rates for the dollar and Euro payments C. For a Dollars floating, Euros fixed swap, determine the first swap payment d. Assume that 120 have passed since the initiation of the swap. The new exchange rate is $1.42/. The nevw term structure of the dollar and Euro LIBOR is as follows: # of days until payment | Dollar LIBOR ( Euro LIBOR 60 240 420 600 6.80 .05 .15 7.20 6.40 6.90 7.30 7.45 Determine the value of the swap in part (c) in light of this information.
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ANSWER: 4) a) Given that The dollar notional principal will be The current exchange rate is $100 million. = $1.60/€. Formula:

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