(b) Equizuo Corporation and Mithril Corporation has entered into a 5 year currency swap for $2...

(b) Equizuo Corporation and Mithril Corporation has entered into a 5 year currency swap for $2 million. Equizuo Corporation is a US-based MNE and Mithril Corporation is a EURbased MNE. The spot exchange rate is S (€ / $) = 1.25.

Calculate the following:

i. Interest amount that each firm need to serve at the end of the year given that US interest rate is 4.7 percent and EUR interest rate is 5.2 percent.

ii. Given the exchange rate after 1 year is S (€ / $) = 1.27, calculate the amount that Equizuo Corporation and Mithril Corporation need to pay in dollar term.

Expert Solution

jeff jeffy answered 2 years ago

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