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Problem: (16 points) 18. Consider a two-year currency swap with semiannual payments. The domestic currency is the U.S. dollar, and the foreign currency is the

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Problem: (16 points) 18. Consider a two-year currency swap with semiannual payments. The domestic currency is the U.S. dollar, and the foreign currency is the UK pound. The current exchange rate is $1.41/. Show all factor calculation to at least 4 decimal places. a. Calculate, or provide, the annualized fixed rate for dollars and for pounds. The current U.S. term structure is (HINT: same as question 815a): (180) 5.85% (360) = 6,05% L(540) - 6.24% L.720) = 6,65% The U.K term structure is: LE(180) - 4.93% Lof (360) 5.05% LE (540) = 5.19% LE (720) 5.51% Move forward 120 days. The new exchange rate is $1.35 per pound, and the new US term structure is the same as problem 015b b L60) 6.13% Lx240) - 6.29% L420) 6.53% L1600) - 6,97% The UK, term structures LE (60) = 5.17% LE (240) - 5.32% LE (420) 5.68% LE (600) -5.83% Assume that the notional principal is si or corresponding British pounds. Calculate the market value of the following swaps 0 Pay pounds foed, receive fixed Pay pounds floating, receive fixed I Pay pound floating, receive floating w Pay pound fond, received floating Problem: (16 points) 18. Consider a two-year currency swap with semiannual payments. The domestic currency is the U.S. dollar, and the foreign currency is the UK pound. The current exchange rate is $1.41/. Show all factor calculation to at least 4 decimal places. a. Calculate, or provide, the annualized fixed rate for dollars and for pounds. The current U.S. term structure is (HINT: same as question 815a): (180) 5.85% (360) = 6,05% L(540) - 6.24% L.720) = 6,65% The U.K term structure is: LE(180) - 4.93% Lof (360) 5.05% LE (540) = 5.19% LE (720) 5.51% Move forward 120 days. The new exchange rate is $1.35 per pound, and the new US term structure is the same as problem 015b b L60) 6.13% Lx240) - 6.29% L420) 6.53% L1600) - 6,97% The UK, term structures LE (60) = 5.17% LE (240) - 5.32% LE (420) 5.68% LE (600) -5.83% Assume that the notional principal is si or corresponding British pounds. Calculate the market value of the following swaps 0 Pay pounds foed, receive fixed Pay pounds floating, receive fixed I Pay pound floating, receive floating w Pay pound fond, received floating

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