Question 14 (5 points) Saved A currency swap has a remaining life of 15 months....
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Question 14 (5 points) Saved A currency swap has a remaining life of 15 months. It involves exchanging interest at 7.25% on 50 million for interest at 4.15% on $75 million once a year. The term structure of risk-free interest rates in the United Kingdom is flat at 5.45% and the term structure of risk-free rates in the United States is flat at 3.25% (both with continuous compounding). The current exchange rate (dollars per pound sterling) is 1.4950. What is the value of the swap to the party paying sterling? 1) -$2.2330 million 2) $2.2330 million 3) -$2.450 million 4) $2.450 million
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