Assume that a company enters into a $$50$ million, $7-$year, cross$-$currency swap to

pay euros and receive dollars. Further, assume the spot exchange rate is $1\mathrm{.}15$ USD$/$EUR$,$ the

euro interest rate is $3\mathrm{.}4\%,$ and the US rate is $4\mathrm{.}6\%.$

a$.$ What is the annual interest payment in each currency?

b$.$ Assume that three years later, the company wants to unwind the swap agreement. Further,

assume that the euro interest rate has risen to $3\mathrm{.}9\%,$ the US rate has risen to $4\mathrm{.}7\%,$ and the

spot rate has risen to $1\mathrm{.}20$ USD$/$EUR$.$ What is the net present value, and will the company

pay or receive cash when closing out the position early?