Some time ago, a bank entered into a currency swap in which it pays 5% per annum with annual compounding in Euros (EUR) and receives 6% per annum with annual compounding in Japanese Yen (JPY) once a year. The principal amounts are EUR 5 million and JPY 500 million. The swap will last for another 4 years and the current exchange rate is 0.008 EUR per JPY. Suppose that all EUR LIBOR/swap zero rates are 3% per annum and all JPY LIBOR/swap zero rates are 4% per annum (both with continuous compounding).

(a) A currency swap can be valued as the difference between two bonds. Use this method to compute the value of this currency swap for the bank in EUR now.

(b) A currency swap can be valued as a portfolio of forward contracts. Use this method to compute the value of this currency swap for the bank in EUR now.