Problem 8-16 (algorithmic) Question Holp Falcor (US). Falcor is the U.S.-based automotive parts supplier that was spun-off from General Motors in 2000. With annual sales of over $26 billion, the company has expanded its markots far beyond traditional automobile manufacturers in the pursuit of a more diversified sales base. As part of the general diversification effort, the company wishes to diversity the currency of denomination of its debt portfolio as well. Assume Falcor enters into a $62 million 7-year cross-currency interest rate swap to do just that-pay ouros and receive dollars. Using the data in this table solve the following: a. Calculate all principal and interest payments in both currencies for the life of the swap b. Assume that three years later Falcor decides to unwind the swap agreement. If 4-year fixed rates of interest in euros have now risen to 5.31%, 4-year fixed-rato dollars have fallen to 4.37%, and the current spot exchange rate is $104/, what is the net present value of the swap agreement? Explain the payment obligations of the two parties precisely a. Calculate all principal and interest payments in both currencies for the life of the swap. The annual cash inflow for years one through six is $1(Round to the nearest dollar.) i Data Table EXHIBIT 8.12 Intorost Rato Swap Quotes (December 31, 2014) Sterling Bid Ask Years 1 0.63 0.91 0.66 0.95 2 3 1.11 1.15 4 1.33 5 6 7 8 9 Euro Bid Ask 0.14 0.18 0.16 0.20 0.20 0.24 0.26 0.30 0.34 0.38 0.42 0.46 0.51 0.55 0.60 0.64 0.70 0.74 0.79 0.83 0.95 0.99 1.12 1.16 1.30 1.34 1.28 1.42 1.53 1.62 1.69 1.76 1.82 1.91 2.02 2.12 1.47 1.58 1.67 1.74 1.81 1.87 1.98 2.11 2.25 Swiss franc Bid Ask 0.14 0.08 0.18 0.10 0.14 -0.06 0.07 0.01 0.02 0.10 0.11 0.19 0.21 0.29 0.30 0.38 0.39 0.47 0.47 0.55 0.59 0.69 0.75 0.85 0.95 1.05 U.S. dollar Bid Ask 0.42 0.45 0.86 0.89 1.26 1.29 1.55 1.58 1.75 1.78 1.90 1.93 2.02 2.05 2.11 2.10 2.19 2.22 2.26 2.29 2.37 2.40 2.48 2.51 2.59 2.62 Japanese yon Bid Ask 0.11 0.17 0.11 0.17 0.13 0.19 0.15 0.21 0.19 0.25 0.24 0.30 0.30 0.36 0.36 0.42 0.42 0.48 0.49 0.55 0.61 0.69 0.82 0.90 1.09 1.17 10 12 15 20 Problem 8-16 (algorithmic) Question Holp Falcor (US). Falcor is the U.S.-based automotive parts supplier that was spun-off from General Motors in 2000. With annual sales of over $26 billion, the company has expanded its markots far beyond traditional automobile manufacturers in the pursuit of a more diversified sales base. As part of the general diversification effort, the company wishes to diversity the currency of denomination of its debt portfolio as well. Assume Falcor enters into a $62 million 7-year cross-currency interest rate swap to do just that-pay ouros and receive dollars. Using the data in this table solve the following: a. Calculate all principal and interest payments in both currencies for the life of the swap b. Assume that three years later Falcor decides to unwind the swap agreement. If 4-year fixed rates of interest in euros have now risen to 5.31%, 4-year fixed-rato dollars have fallen to 4.37%, and the current spot exchange rate is $104/, what is the net present value of the swap agreement? Explain the payment obligations of the two parties precisely a. Calculate all principal and interest payments in both currencies for the life of the swap. The annual cash inflow for years one through six is $1(Round to the nearest dollar.) i Data Table EXHIBIT 8.12 Intorost Rato Swap Quotes (December 31, 2014) Sterling Bid Ask Years 1 0.63 0.91 0.66 0.95 2 3 1.11 1.15 4 1.33 5 6 7 8 9 Euro Bid Ask 0.14 0.18 0.16 0.20 0.20 0.24 0.26 0.30 0.34 0.38 0.42 0.46 0.51 0.55 0.60 0.64 0.70 0.74 0.79 0.83 0.95 0.99 1.12 1.16 1.30 1.34 1.28 1.42 1.53 1.62 1.69 1.76 1.82 1.91 2.02 2.12 1.47 1.58 1.67 1.74 1.81 1.87 1.98 2.11 2.25 Swiss franc Bid Ask 0.14 0.08 0.18 0.10 0.14 -0.06 0.07 0.01 0.02 0.10 0.11 0.19 0.21 0.29 0.30 0.38 0.39 0.47 0.47 0.55 0.59 0.69 0.75 0.85 0.95 1.05 U.S. dollar Bid Ask 0.42 0.45 0.86 0.89 1.26 1.29 1.55 1.58 1.75 1.78 1.90 1.93 2.02 2.05 2.11 2.10 2.19 2.22 2.26 2.29 2.37 2.40 2.48 2.51 2.59 2.62 Japanese yon Bid Ask 0.11 0.17 0.11 0.17 0.13 0.19 0.15 0.21 0.19 0.25 0.24 0.30 0.30 0.36 0.36 0.42 0.42 0.48 0.49 0.55 0.61 0.69 0.82 0.90 1.09 1.17 10 12 15 20