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Suppose GBP term structure Maturity time 5 years swap rate 7.5% Us term structure Maturity time 5 years swap rate 8.5% What is the value
Suppose GBP term structure
Maturity time 5 years swap rate 7.5%
Us term structure
Maturity time 5 years swap rate 8.5%
What is the value of the swap to pay 5 % GBP and receive 5% of us , on gbp principal for 5 years?Take the spot exchange rate , GBP 1.0 to us 1.5.Assume that the principal amounts are swapped at maturity : GBP 100m for US 150.Also assume that interest payments of 2.5% of the principal are made semiannually, for the swap.
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