1) Suppose that the term structure of interest rates is flat in England and Germany. The GBP interest rate is 5% per annum and the EUR rate is 4% per annum (continuously compounded). In a swap agreement, a financial institution pays 8% per annum in GBP and receives 6% per annum in EUR (annually compounded). The exchange rate between the two currencies has changed from 1.20 EUR per GBP to 1.15 EUR per GBP since the swap's initiation. The swap had a zero value when it was initiated. The principal in British pounds is 15 million GBP. Payments are exchanged every year, with one exchange having just taken place. The swap will last three more years. What is the value of the swap to the financial institution in terms of euros?