Notional principal € 40,000,000.

00
So (EUR/USD) 1.3

Bid Ask
USD 5.73% 5.76%
EUR 3.63% 3.67%

US MNE perspective
Notional principal in USD $ 52,000,000.00
0 1 2 3
Cash inflow in USD with
the bid rate of USD @
5.73% $ 2,979,600.00 $ 2,979,600.00 $ 2,979,600.00
Cash outflow in EUR with
the ask rate in EUR @
3.67% € 1,468,000.00 € 1,468,000.00 € 1,468,000.00

French MNE perspective

Notional principal in USD $ 52,000,000.00
0 1 2 3
Cash inflow in EUR with
the bid rate of EUR @
3.63% € 1,452,000.00 € 1,452,000.00 € 1,452,000.00
Cash outflow in USD with
the ask rate in USD @
5.76% $ 2,995,200.00 $ 2,995,200.00 $ 2,995,200.00

UNWINDING SWAP
Interest rate on 3-year €
cash flows 6%
Interest rate on 3-year $
cash flows 7.50%
Future spot exchange rate
at year 3 (EUR/USD) 1.35

US MNE perspective (if US MNE wants to cancel the swap contract)

0 1 2 3
Cash inflow in USD with
the bid rate of USD @
5.73% $ 2,979,600.00
Cash outflow in EUR with
the ask rate in EUR @
3.67% € 1,468,000.00

PV of the cash inflow $49,606,476.11

PV of the cash outflow € 37,508,752.86
PV of the cash outflow in
USD $ 50,636,816.37
inflow - outflow ($1,030,340.26)
The US MNE has to pay $1,030,340 to the swap bank to cancel the swap contract

French MNE perspective (if French MNE wants to cancel the swap contract)
0 1 2 3
Cash inflow in EUR with
the bid rate of EUR @
3.63% € 1,452,000.00
Cash outflow in USD with
the ask rate in USD @
5.76%% $ 2,995,200.00

PV of the cash inflow € 37,465,984.67

PV of the cash outflow $49,647,044.31
PV of the cash inflow in
USD $ 50,579,079.31
inflow - outflow $ 932,035.00
The swap bank has to pay $932,035 when French MNE wants to cancel the swap contract
 4 5

$ 2,979,600.00 $ 54,979,600.00

€ 1,468,000.00 € 53,468,000.00

4 5

€ 1,452,000.00 € 41,452,000.00

$ 2,995,200.00 $ 54,995,200.00

4 5

$ 2,979,600.00 $ 54,979,600.00
€ 1,468,000.00 € 41,468,000.00

4 5

€ 1,452,000.00 € 41,452,000.00

$ 2,995,200.00 $ 54,995,200.00
Notional principal $ 10,000,000
S0 (USD/CHF) 1.5
S1 (USD/CHF) 1.556
New interest rate for USD 5.20%
New interest rate for CHF 2.20%
Bid Ask
USD 5.56% 5.59%
CHF 1.93% 2.01%

US company perspective
Notional principal in CHF 15,000,000 CHF
0 1 2
Cash inflow in USD with
the bid rate @5.56% $ 556,000 $ 556,000
Cash outflow in CHF with
the ask rate @2.01% 301,500.00 CHF 301,500.00 CHF

Swiss company perspective

0 1 2
Cash inflow in CHF with
the bid rate @1.93% 289,500.00 CHF 289,500.00 CHF
Cash outflow in USD with
the ask rate @5.59% $ 559,000.00 $ 559,000.00

UNWINDING SWAP
US company perspective (If the US company wants to cancel the swap contract)
0 1 2
Cash inflow in USD with
the bid rate @5.56% $ 556,000
Cash outflow in CHF with
the ask rate @2.01% 301,500.00 CHF

PV of the cash inflow $10,066,749.56

PV of the cash outflow 14,944,827.30 CHF
PV of the cash outflow in
USD $ 9,604,644.80
inflow - outflow $462,104.76
The swap bank has to pay the US Company $462,104 to cancel the swap contract

Swiss company perspective (if the Swiss company wants to cancel the swap contract)
0 1 2
Cash inflow in CHF with
the bid rate @1.93% 289,500.00 CHF
Cash outflow in USD with
the ask rate @5.59% $ 559,000.00

PV of the cash inflow 14,921,596.69 CHF

PV of the cash outflow $10,072,312.02
PV of the cash outflow in
CHF 15,672,517.50 CHF
inflow - outflow - 750,920.81 CHF $ (482,596.92)
The Swiss company has to pay 750,920 CHF to the swap bank the cancel the swap contract
 3

$ 10,556,000

15,301,500.00 CHF

15,289,500.00 CHF

$ 10,559,000.00

$ 10,556,000

15,301,500.00 CHF

15,289,500.00 CHF
 $ 10,559,000.00

swap contract