Delphi is the US-based automotive parts supplier that was spun off from General Motors in 2000. With annual sales of over $26 billion, the company has expanded its markets far beyond the traditional automobile manufacturers in the pursuit of a more diversified sales base. As part of the general diversification effort, the company wishes to diversify the currency of denomination of its debt portfolio as well. Assume Delphi enters into a $50 million seven-year cross-currency interest rate swap to do just that – pay euros and receive dollars. Using the data in Exhibit 9.10 in the text,

Question

Delphi is the US-based automotive parts supplier that was spun off from General Motors in 2000. With annual sales of over $26 billion, the company has expanded its markets far beyond the traditional automobile manufacturers in the pursuit of a more diversified sales base. As part of the general diversification effort, the company wishes to diversify the currency of denomination of its debt portfolio as well. Assume Delphi enters into a $50 million seven-year cross-currency interest rate swap to do just that – pay euros and receive dollars. Using the data in Exhibit 9.10 in the text,
a.	Calculate all principal and interest payments in both currencies for the lifew of the swap.
b.	Assume that three years later Delphi decides to unwind the swap agreement. If four-year fixed rates of interest in euros have now risen to 5.35%, four-year fixed rate dollars have fallen to 4.40%, and the current spot exchange rate is $1.08/€, what is the net present value of the swap agreement? Who pays who what?