A five-year currency swap involves two AAA borrowers and has been set at current market...
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A five-year currency swap involves two AAA borrowers and has been set at current market interest rates. The swap is for US$100 million against AUD 180 million at the current spot exchange rate of AUD/$ 1.8. The interest rates are 12% in U.S. dollars and 9% in Australian dollars. A year later, the interest rates are 10% in U.S. dollars and 8% in Australian dollars, and the exchange rate is now AUD/$ 1.9.
What should the market value of the swap be in the secondary market?
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