3. Omega is a U.S.-based automotive parts supplier. With annual sales of over $26 billion, the company has expanded

its markets far beyond the traditional automobile manufacturers in the pursuit of a more diversified sales base. As part

of the general diversification effort, the company wishes to diversify the currency of denomination of its debt portfolio

as well. Assume Omega enters into a $50 million 7-year cross currency interest rate swap to do just that - pay euro and

receive dollars. Current swap and exchange rates are as follow:

Assumptions:

Notional Principal:$50,000,000

Spot exchange rate, $/: 1.1225

Swap Rates:

US dollar

7- year bid: 5.86%

7-year ask: 5.89%

Swap Rates:

Euros

7- year bid: 4.01%

7-year ask: 4.05%

a. Calculate all principal and interest payments in both currencies for the life of the swap.

b.Assume that three years later Omega decides to unwind the swap agreement. If 4-year fixed rates of interest in

euros have now risen to 5.35% and 4-year fixed rate dollars have fallen to 4.40%, and the current spot exchange

rate of $1.0460/, what is the net present value of the swap agreement? Who pays whom what amount?