A firm with fixed-rate debt that expects interest rates to fall may engage in a swap agreement to:

Assume that one year into the swap agreement Ganado decides it wishes to unwind the swap agreement and settle it in euros. Assuming that a two-year fixed rate of interest on the Japanese yen is now 0.80%, and a two-year fixed rate of interest on the euro is now 3.60%, and the spot rate of exchange is now 114/, what is the net present value of the swap agreement? Who pays whom what? (When you answer the question, please ignore the currency symbols. Just the numbers with no decimal points, for example, 123,456.) Please fill out all the blanks. Then answer how much is cumulative PV of euro cash flows (Question 24) and Net cash settlement of unwinding (Question 25).
b) Unwinding the swap after one-year				Year 1		Year 2		Year 3
Remaining euro cash inflows
PV factor at now current fixed interest		3.60%				0.9653		0.9317
PV of remaining cash inflows
Cumulative PV of cash infllows		Question 24
Remaining cash outflows
PV factor at now current fixed interest		0.80%				0.9921		0.9842
PV of remaining cash outflows
Cumulative PV of cash outflows
New current spot rate, /		114.00
Cumulative PV of cash outflows in
Settlement:
Cash inflow
Cash outflow
Net cash settlement of unwinding		Question 25		This is a cash receipt by Ganado from the swap dealer.