Compute the net cash flow

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Reference no: EM131179840

A U.S. firm is expected to receive a floating rate of (LIBOR+125 bps) on €5 million for four years. Payments will be made annually. The current exchange rate is $1.06 / €. The company wants to hedge its interest rate risk so it enters into a swap: receive a fixed rate of 5.65% and pay a floating rate of (LIBOR+100 bps) on €5 million. No notional principal exchanged. Compute the net cash flow.

Reference no: EM131179840

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