12 Central Bank Liquidity Swaps (10 Points) Immediately prior to the 2020 coronavirus pandemic, the U.S. Federal Re- serve had standing U.S. dollar liquidity swap lines with major central banks. These swap lines were established in order to lessen strains in global U.S. dollar funding markets due to the pandemic and mitigate their effects on the supply of credit to households and businesses across the world. Sup- pose Bank of Korea would like to initiate a 6-month swap with the U.S. Federal Reserve to exchange South Korean Won (KRW) for U.S. dollars (USD). That is, Bank of Korea would like to short a KRW swap leg and long a USD swap leg each month for 6 months. C. (3 Points) What is the NPV of the swap today from the Bank of Korea's perspective? d. (3 Points) After 3 months, assume that the KRW interest rate has decreased to 2% per annum. The USD/KRW exchange rate after 3 months is 1,350.56. What is the value of the swap from the Bank of Korea's perspective in won? 12 Central Bank Liquidity Swaps (10 Points) Immediately prior to the 2020 coronavirus pandemic, the U.S. Federal Re- serve had standing U.S. dollar liquidity swap lines with major central banks. These swap lines were established in order to lessen strains in global U.S. dollar funding markets due to the pandemic and mitigate their effects on the supply of credit to households and businesses across the world. Sup- pose Bank of Korea would like to initiate a 6-month swap with the U.S. Federal Reserve to exchange South Korean Won (KRW) for U.S. dollars (USD). That is, Bank of Korea would like to short a KRW swap leg and long a USD swap leg each month for 6 months. C. (3 Points) What is the NPV of the swap today from the Bank of Korea's perspective? d. (3 Points) After 3 months, assume that the KRW interest rate has decreased to 2% per annum. The USD/KRW exchange rate after 3 months is 1,350.56. What is the value of the swap from the Bank of Korea's perspective in won