In a Fixed-For-Fixed Currency Swap,3% on a US Dollar Principal

question 1

Multiple Choice

In a fixed-for-fixed currency swap,3% on a US dollar principal of $150 million is received and 4% on a British pound principal of 100 million pounds is paid.The current exchange rate is 1.55 dollar per pound.Interest rates in both countries for all maturities are currently 5% (continuously compounded) .Payments are exchanged every year.The swap has 2.5 years left in its life.What is the value of the swap?

• A)-$7.15
• B)-$8.15
• C)-$9.15
• D)-$10.15

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Definitions:

SSE

Stands for Sum of Squares due to Error, a measure used in statistics to quantify the dispersion of data points.

F Statistic

A ratio of two variances that is used in ANOVA or regression analysis to assess the significance of group differences or the contribution of predictor variables.

Main Effect

The primary effect of an independent variable on a dependent variable in an experimental or observational study.

Gender

A social construct that refers to the roles, behaviors, activities, expectations, and norms considered appropriate for individuals based on their perceived sex.