Consider two firms Diamond Corporation and Amber Corporation. Diamond Corporation is a US-based multinational enterprise. Meanwhile Amber Corporation is a Europe-based multinational enterprise. Both firms enter into 5 years currency swap for $6 million. The spot exchange rate is S ( / $) = 1.25.

Calculate the Interest amount that each firm need to serve at the end of the year given that US interest rate is 4.7 percent and Europe interest rate is 5.4 percent.

(6 marks)

Given the exchange rate after 1 year is S ( / $) = 1.37, calculate the amount that Diamond Corporation or Amber Corporation need to pay in dollar term