Question
XYZ has a short notional principal to euro. XYZ has a total firm value of $8000 and total USD debt value of $5000. XYZs operating
XYZ has a short notional principal to euro. XYZ has a total firm value of $8000 and total USD debt value of $5000. XYZ’s operating exposure to euro is 1.70. $4000 of total debt is euro denominated. Assume swap is “at market” which means market yields are same as original coupon rates.
How much notional principal should XYZ be short in euros in a currency swap to reduce equity exposure to zero?
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To reduce equity exposure to zero through a currency swap XYZ needs to match its eurodenominated deb...
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International Financial Management
Authors: Cheol S. Eun, Bruce G.Resnick
6th Edition
71316973, 978-0071316972, 78034655, 978-0078034657
