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Please provide me with an accurate solution to the following problem: A Swap involving the exchange of currencies is set to expire in 15 months.
Please provide me with an accurate solution to the following problem:
A Swap involving the exchange of currencies is set to expire in 15 months. It concerns exchanging interest at a rate of 10% rate on PS20 Million and at 6% on $30 Million onetime annually. The term structure in both countries is flat and a present day currency swap would involve the exchange of dollar interest at 4% and pound sterling at 7% both of which are quoted with annual compounding. The current exchange rate is 1.55. What is the value of the swap to both parties?
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