Question
When a 2-year currency swap between U.S. Dollars and Currency X is created, the exchange rate is X2.04/USD and the term structures of interest rates
When a 2-year currency swap between U.S. Dollars and Currency X is created, the exchange rate is X2.04/USD and the term structures of interest rates are flat at 3.14% in the U.S. and 2.49% in Country X. The swap has annual payments and a notional principal of $1 million. 15 months later, the exchange rate is X1.91/USD and the term structures of interest rates are flat at 4.1% in the U.S. and 2.9% in Country X. For the party that is paying dollars, what is the present value of this swap? Put your answer in dollars and round to the nearest dollar. The answer is 70656. How do you get that?
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