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Consider a fixed-for-fixed 3-year currency swap. For company A, 3.5% on a US dollar principal of $130 million is received and 4.5% on a British
Consider a fixed-for-fixed 3-year currency swap. For company A, 3.5% on a US dollar principal of $130 million is received and 4.5% on a British pound principal of 120 million pounds is paid. Payments are exchanged every year. The swap still has 2.5 years left in its life. The current exchange rate is 1.45 dollar per pound. Interest rates in both countries for all maturities are currently 1% (continuously compounded). What is the value of the swap for company A? US $9.69 million US $-52.61 million US $12.56 million US $-9.69 million
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