Project 2: Lufthansa's Cross Currency Swaps Lufthansa Company entered into a three year cross-currency interest rate swap to pay euros and receive yen, on a notional principal of 5,000,000. It received the following quotes from a swap dealer working for the Citibank. Since Citibank always likes to hedge its position in a swap, it found a counterparty (SONY) for this swap. All relevant cash flows are passed through the Citibank. The spot rate at the time of initiation of the swap is 97/. The relevant interest rate data for the swaps are as follows: Previously, Lufthansa had conducted a pay Swiss franc and receive US dollars cross currency swap. It had earlier calculated its cash flows as follows: A. Use the above table as a guide and calculate all principal and interest payments in both euros and yen for the life of the swap agreement for all parties involved (Lufthansa, swap dealer, and Sony). . Graphically illustrate the cash flows (principal and interest payments) in both euros and yen for all three parties. Box diagrams representing cash flows among all parties and arrows indicating the direction of the cash flows (just like we presented in the class). c. Suppose that after one year into the swap agreement, Lufthansa decided to terminate the swap (unwind). Assuming that a two-year fixed interest rate on the Japanese yen is now .5\%, a twoyear fixed interest rate on euro is now 1.7%, and the current spot rate had changed to 101/. What is the NPV of the swap agreement? Who pays whom what? D. Why should any party cancel this existing swap? Discuss