$(15$ points$)$ You want to enter a $4-$year, annual payment bond swap to pay USD and receive

GBP on a notional amount of $$20$ million. The spot exchange rate is $1\mathrm{.}30$ USD$/$GBP$.$ The

UK interest rate is $3\mathrm{.}5\%,$ and the US rate is $2\mathrm{.}4\%.$

a$.$ Build a table showing the $4$ years of cash flows.

b$.$ What is your expectation of the one$-$year forward rate using international parity

conditions?

c$.$ What is the value of the swap one year from now if your spot rate in B is correct but the

interest rates have moved to $3\mathrm{.}1\%$ in the UK and $2\mathrm{.}7\%$ in the US$?$