Consider a currency swap between Company A (which wants to invest in New Zealand) and B (which wants to invest in Australia). Three years ago, they entered into a swap with a five- year term on a principal of NZD 106 million. The spot exchange rate is 1.06NZD per AUD. Complany A raises 106/1.06=100 million AUD and gives it to company B, who, in turn, raises 106 million NZD and gives it to Company A. A pays B at the coupon rate of 3 percent per year on 106 million NZD and B pays A at the coupon rate of 4 percent per year on 100 million AUD for two years. Now, assume that the companies make payments every six months: the swap ends after four semi-annual payments, and the principals are handed back after two years. All the interest rates are continuously compounded. Compute the value of this currency swap. Time to Maturity NZ (domestic) zero-coupon interest rate AU zero-coupon interest rate (in Years) 0.5 1.25% 1.55% 1.50% 1.65% 1.5 1.75% 2.00% 2 2.00% 2.25% 1