A while ago you have entered into a currency swap which will expire in 2 years and 2 months. You are floating rate payer in US-dollars (USD) (12-month libor) and 3%

fixed rate receiver in UAE Dirhams (AED). The notional principals are USD10000000 and AED37000000. Payments are exchanged annually. The 12-month libor (in USD)

USD 10 months ago was 2% (1 times c.p.a.). The current exchange rate is 0.27AED. The 2-month, 14-month and 26-month spot rates in the USA are 2.5%, 3% and 3.4% (c.c.) and the equivalent rates in the UAE are 4%, 3.8% and 3.7% (c.c.). What is the value of the swap for you? How about your counter-party? Verify that both pricing methods introduced in class - swapping bonds and using FRAs to value a swap - yield the same result.