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Consider a U.S. company that enters into a currency swap with a dealer to pay a fixed rate on euros. The notional principal is $10,000,000.

Consider a U.S. company that enters into a currency swap with a dealer to pay a fixed rate on euros. The notional principal is $10,000,000. The domestic interest rate is 6.25% in dollars, and the foreign interest rate is 5.5% in euros. Assume an exchange rate of 1.25/$ Calculate the semiannual payments and identify the amounts paid by each party.

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