10. Delphi. Delphi is the U.S.-based automotive parts supplier which was spun off from General Motors in...
Question:
10. Delphi. Delphi is the U.S.-based automotive parts supplier which was spun off from General Motors in 2000. With annual sales of over $26 billion, the com- pany has expanded its markets far beyond the tradi- tional automobile manufacturers in the pursuit of a more diversified sales base. As part of the general diversification effort, the company wishes to diver- sify the currency of denomination of its debt portfo- lio as well. Assume Delphi enters into a $50 million seven-year cross currency interest rate swap to do just that-pay euros and receive dollars. Using the data in Exhibit 15.10:
a. Calculate all principal and interest payments in both currencies for the life of the swap.
b. Assume that three years later Delphi decides to unwind the swap agreement. If four-year fixed rates of interest in euros have now risen to 5.35%, four-year fixed rate dollars have fallen to 4.40%, and the current spot exchange rate of $1.02/, what is the net present value of the swap agree- ment? Who pays who what?
Step by Step Answer:
Fundamentals Of Multinational Finance
ISBN: 9780321541642
3rd Edition
Authors: Michael H. Moffett, Arthur I. Stonehill, David K. Eiteman