Problem $5(20\%)$

A financial institution has entered into a $10-$year currency swap with company Y$.$ Under the terms of the swap, the financial institution receives interest at $3\%$ per annum in Swiss francs and pays interest at $8\%$ per annum in U$.$S$.$ dollars. Interest payments are exchanged once a year. The principal amounts are $7$ million dollars and $10$ million francs. Suppose that company Y declares bankruptcy at the end of year $6,$ when the exchange rate is $$0\mathrm{.}80$ per franc. What is the cost to the financial institution? Assume that, at the end of year $6,$ riskfree interest rates are $3\%$ per annum in Swiss francs and $8\%$ per annum in U$.$S$.$ dollars for all maturities. All interest rates are quoted with annual compounding.