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Show the calculation process in Excel please Suppose that the term structure of interest rates is flat in the United States and in the United
Show the calculation process in Excel please
Suppose that the term structure of interest rates is flat in the United States and in the United Kingdom. The USD interest rate is 6% per annum and the GBP interest rate is 7% per annum. The current FX spot rate is 1.506 USD/GBP. Under the terms of a swap agreement, a financial institution pays 7% per annum in USD and receives 9% per annum in GBP. The swap principals in the two currencies are 15 million USD and 10 million GBP. Payments are exchanged every year with one exchange having just taken place. The swap will last four more years. a. What is the amount of the annual payments in GBP using the current FX spot rate? The amount is ) GBP (round to integer GBP) b. What is the present value of all the future incoming payment streams to the financial institution? The present value is ) GBP. (round to integer GBP) c. What is the GBP value of the swap to the financial institution? The swap value is ) GBP. (round to integer GBP) d. What is the implied contractual exchange rate of the final currency exchange? The implied contractual exchange rate is ) USD/GBP. (round to 4 decimals)Step by Step Solution
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