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A currency swap has a remaining life of 15 months. It involves exchanging interest at 14% of 20 million GBP for interest at 10% on
A currency swap has a remaining life of 15 months. It involves exchanging interest at 14% of 20 million GBP for interest at 10% on 30 million USD once a year. The interest rates (flat) are 8% in USD and 11% in GBP (ac). The current exchange rate is 1.65 USD per GBP. What is the value of the swap to the party paying GBP? Find this value twice (in terms of bonds and forwards)
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