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Question 4Given the following swap rates, Charlton Ferguson, ChiefFinance Officer of Red Devils Ltd., decides to enter into afour-year currency swap agreement to receive pounds and pay euros,on a notional principal of £33,000,000. The spot exchange rate atthe time of the swap is €1.8300/£. SwapRates Years £bid £ask € bid € ask 2 4.08%4.28% 3.10% 3.30% 3 4.18%4.33% 3.25% 3.48% 4 4.23%4.48% 3.30% 3.60%a) Calculate allprincipal and interest payments, in both pounds and euros, over thelife of the currency swap agreement.b) Assuming that twoyears into the swap agreement, Charlton Ferguson decides to unwindthe swap agreement and settle it in pounds. Assume that a two-yearfixed rate of interest on pounds is 4.50%, a two-year fixed rate ofinterest on euros is 3.80%, and the spot rate of exchange is now€1.7788/£. Find the net settlement amount of unwinding the swap andstate who pays to whom the net settlement amount (Red Devils Ltd.pays to swap dealer or swap dealer pays to Red DevilsLtd.).