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The automakers enter into a swap with a three-year term on a principal of $200 million. The spot exchange rate is $2 per pound. Americana
The automakers enter into a swap with a three-year term on a principal of $200 million. The spot exchange rate is $2 per pound. Americana raises $200 million and gives it to Britannia, which in turn raises 100 million and gives it to Americana. Americana pays Britannia 2% per six months on 100 million and Britannia pays Americana 3% per six months on $200 million. The principals are handed back after three years. Using the following zero-coupon bonds, compute the value of the swap.
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