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4. It is July 1, 2023. A bank has five more years remaining in a currency swap according to which it makes annual interest

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4. It is July 1, 2023. A bank has five more years remaining in a currency swap according to which it makes annual interest payments at the end of each year at an effective annual rate of 6% on a 10,000,000 principal and receives annual interest payments at the end of each year at an effective annual rate of 7% on a $10,800,000 principal. The current EURUSD exchange rate is 1.08. Compute the value of this currency swap for the bank based on the risk-free zero yields given below in continuously compounded form. USD EUR 1-year 2-year 5.00% 4.50% 3.25% 2.75% 3-year 4.00% 2.50% 4-year 3.75% 2.30% 5-year 3.50% 2.20%

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To compute the value of the currency swap we need to calculate the present value of the future cash flows associated with the swap We will discount th... blur-text-image

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