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Determine the semiannual cash flows

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Question - A company based in the United Kingdom has an Italian subsidiary. The subsidiary generates €23 million a year, received in equal semiannual installments. The British company wishes to convert the euro cash flows to pounds twice a year. It plans to engage in a currency swap in order to lock in the exchange rate at which it can convert the euros to pounds. The current exchange rate is €1.5/£. The fixed rate on a plain vanilla currency swap in pounds is 6.6 percent per year, and the fixed rate on a plain vanilla currency swap in euros is 5.2 percent per year. Determine the semiannual cash flows that the company will receive from this swap?

Reference no: EM133022253

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