Hi Tutor!

Could you kindly assist with this question from the John C Hull Textbook.

Please also unpack it in theoretical terms as well for better understanding.

"Assume that the term structure of interest rates is flat in the United States and in Australia. The USD interest rate is 6% per annum and the AUD rate is 8.5% per annum. The current value of the AUD is 0.62 USD. Under the terms of the swap agreement, a financial institution pays 7% per annum in AUD and receives 5.2% per annum in USD. The principles in the two currencies are $12 million USD and $20 million AUD. Payments are exchanged every year, with one exchange having just taken place. The swap will last 2 more years. What is the value of the swap to the financial institution? Show both valuation methods. Assume all rates are continuously compounded."

Thank You