What is value of the swap to the party paying dollars

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Reference no: EM131354097

A currency swap has a remaining life of 15 months. It involves exchanging interest at 11% on £51 million for interest at 6% on $40 million once a year. The term structure of risk-free interest rates in the United Kingdom is flat at 8% and the term structure of risk-free interest rates in the United States is flat at 3% (both with continuous compounding). The current exchange rate (dollars per pound sterling) is 1.55. What is the value (in millions of dollars) of the swap to the party paying dollars?

Reference no: EM131354097

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