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When a 2-year currency swap between U.S. Dollars and Currency X is created, the exchange rate is X2.01/USD and the term structures of interest

 

When a 2-year currency swap between U.S. Dollars and Currency X is created, the exchange rate is X2.01/USD and the term structures of interest rates are flat at 2.83% in the U.S. and 2.56% in Country X. The swap has annual payments and a notional principal of $1 million. 13 months later, the exchange rate is X1.89/USD and the term structures of interest rates are flat at 4.1% in the U.S. and 2.8% 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. Answer: X Conceptually, this one's easy - take the present value of the inflows minus the present value of the outflows while putting everything in dollars to make the two sides of the swap comparable. Mathematically, this one's tough, simply because there are so many calculations. It's very easy to make a mistake somewhere. For that reason, I hope you gave Yosef lots of time to do this problem.

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