A currency swap has a remaining life of 42 months. It involves exchanging interest at 12% on 20 million for interest at 8% on $30 million once a year and the principals at the end of the life of the contracts.

The term structure of interest rates is flat in both the U.S. and the U.K for the next two years and the rates rise after two years by 2% and 3% respectively in the U.S. and U.K. markets and remain flat once again for the remainder of the term. If the swap were negotiated today, the interest rates exchanged would be $8% and 11%. All rates were quoted with annual compounding.

The current exchange rate is $1.65 = 1.

What is the value of the swap (in USD) to the party paying dollars? (10)