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A U.S. MNC and a French MNC need to borrow for their foreign direct investments. They can issue 1 bond of $220 million or 10
A U.S. MNC and a French MNC need to borrow for their foreign direct investments. They can issue 1 bond of $220 million or 10 -year bond of 200 million at the terms summarized below. A swap bank qu the 10 -year currency swaps as $7.5%7.6% and 8.1%8.15%. (1) Discuss the challenges encountered by the above MNCs in financing for their foreign direct investments. (2) Demonstrate with calculations how the two MNCs benefit from the use of currency swaps. (3) Two years after the initiation of the 10 -year currency swaps, interest rates have change and 8%8.125%, and exchange rate changed to $1.2/6. Calculate the value of the curre by each MNC. Which MNC is willing to unwind the original swap? Explain with calcul
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