Nt yet aeed The 5-year borrowing costs of two MNCS are summarized in the following table. A swap bank quotes 5-year $ swaps at 8.00-8.15 percent and 5-year Cswaps at 6.00-6.10 percent. USD EUR US MNC 8% 7% EU MNC 9% 6% The U.S. MNC will borrow from its lender at and enters the swap under which it pays and receives from the swap bank. and receive The EU MNC wil borrow from its lender at and enters the wap under which it pay

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Present Value

Present value (PV) is defined as the current or present value of all future sums of cash flow or money at a specified rate of return. This rate of return is known as the discounted rate, which is essentially the interest rate, discounted over some time. The expected cash flows are discounted at a discount rate to compute the present value. The higher the discount rate, the higher the future value (FV), but the lower the present value.