In practice, Company D would pay the net difference of $2,165,000 ($4,125,000 – $1,960,000) to Company C. The parties then exchange interest on their respective capital amounts at the intervals set out in the swap agreement. To keep things simple, let`s assume that they make these payments every year, starting one year after the capital exchange. Since Company C has borrowed euros, it must pay interest in euros based on an interest rate in euros. Similarly, Company D that borrowed dollars pays interest in dollars, based on a dollar interest rate. Suppose, for this example, that the agreed interest rate in dollars is 8.25% and the interest rate denominated in euros is 3.5%. . . .