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Part $1$

XYZ Inc. entered into a$$ three$-$year cross$-$currency interest rate swap to receive U$.$S$.$ dollars and pay Euro$().$ XYZ$,$ however, decided to unwind the swap after two years. Based on the information$$ below, if XYZ unwinds the swap after$$ two$-$year, what is the cumulative present value of the remaining dollar cash$$ flows?

Assumptions

Values

Swap Rates

$3-$ year Bid

$3-$year Ask

Notional principal

$$$$16000000$

$$Original: US dollar

$0\mathrm{.}0467$

$0\mathrm{.}0532$

Original spot exchange$$ rate, $$/$

$1\mathrm{.}27$

$$Original: Euro

$0\mathrm{.}018$

$0\mathrm{.}0274$

New$(2-$year later$)$ spot exchange$$ rate, $$/$

$1\mathrm{.}37$

New fixed US dollar interest

$0\mathrm{.}0441$

New fixed$$ interest

$0\mathrm{.}0272$

$$

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Part $1$

The cumulative present value of the remaining dollar cash flows is $$$

$$

XYZ Inc. entered into a three$-$year cross$-$currency interest rate swap to receive U$.$S$.$ dollars and pay Euro $().$ XYZ$,$ however, decided to unwind the swap after two

years. Based on the information below, if XYZ unwinds the swap after two$-$year, what is the cumulative present value of the remaining dollar cash flows?

The correct answer is $(1,223,360\mathrm{.}15)$

Please show work and explain