You are in New Zealand, and have just set up a currency swap between NZD and USD. The swap entails paying 4% NZD, and receiving 3% USD, quarterly, for three years. The exchange rate is USD 0.67 USD = NZD 1

. (a) What are the cash flows for the swap?

(b) 13 months later, the yield curve in New Zealand is flat at 3%, while the yield curve in the US is flat at 1%. The exchange rate is USD 0.6 = NZD 1. What is the swap worth to you (in NZD)?