Calculate the net payments involved and indicate who pays what in this swap deal if the bbalibor takes on the values 7.00 percent, 6.50 percent, 7.00 percent, 7.50 percent, and 6.00 percent at the end of the first, second, third, fourth, and fifth year, respectively.
• The automakers enter into a swap with a three-year term on a principal of $200 million.
• The spot exchange rate SA is $2 per pound. Americana raises 100 x 2 = $200 million and gives it to Britannia, which in turn, raises £100 million and gives it to Americana.
• Americana pays Britannia 4 percent per year on £100 million and Britannia pays Americana 6 percent per year on $200 million at the end of each year for three years.
Now, assume that the companies make payments every six months: the swap ends after six semiannual payments, and the principals are handed back after three years.