Question 4(30 marks) Consider the following swap contract: Americana Auto Company enters into a swap with Britannia Bus Corporation with a three-year term contract on a principal of USD 200 million. The spot exchange rate is USD2.00 per GBP. Americana pays Britannia 4 percent per year on GBP100 million and Britannia pays Americana 6 percent per year on USD 200 million at the end of each year for three years. The companies make these interest payments every six months: the swap ends after six semi-annual payments and the principals are handed back after three years. Using zero-coupon bond prices (maturing every six months) given below, compute the value of this swap. Zero-Coupon Bond Prices in the United States (Domestic Country) and the United Kingdom (Foreign country) Time to Maturity US (Domestic) Zero- UK (Foreign) Zero- (in years) Coupon Bond Coupon Bond Prices in Prices (in dollars) pounds sterling) B105) = $0.99 B105), -0.98 B11) - 0.97 B:1), -0.96 8:15) 0.95 811.5),-0.93 B2) - 0.93 B:2), -0.91 8:2.5) - 0.91 82.5), -0.88 B/3) - 0.88 B(3), -0.85 0.5 Question 4(30 marks) Consider the following swap contract: Americana Auto Company enters into a swap with Britannia Bus Corporation with a three-year term contract on a principal of USD 200 million. The spot exchange rate is USD2.00 per GBP. Americana pays Britannia 4 percent per year on GBP100 million and Britannia pays Americana 6 percent per year on USD 200 million at the end of each year for three years. The companies make these interest payments every six months: the swap ends after six semi-annual payments and the principals are handed back after three years. Using zero-coupon bond prices (maturing every six months) given below, compute the value of this swap. Zero-Coupon Bond Prices in the United States (Domestic Country) and the United Kingdom (Foreign country) Time to Maturity US (Domestic) Zero- UK (Foreign) Zero- (in years) Coupon Bond Coupon Bond Prices in Prices (in dollars) pounds sterling) B105) = $0.99 B105), -0.98 B11) - 0.97 B:1), -0.96 8:15) 0.95 811.5),-0.93 B2) - 0.93 B:2), -0.91 8:2.5) - 0.91 82.5), -0.88 B/3) - 0.88 B(3), -0.85 0.5