A currency swap has a remaining life of 15 months it, Ask an Expert

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A currency swap has a remaining life of 15 months. It involves exchanging interest at 11% on £51 million for interest at 6% on $40 million once a year. The term structure of risk-free interest rates in the United Kingdom is flat at 8% and the term structure of risk-free interest rates in the United States is flat at 3% (both with continuous compounding). The current exchange rate (dollars per pound sterling) is 1.55. What is the value (in millions of dollars) of the swap to the party paying dollars?

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Financial Management, Finance

Category:- Financial Management
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