Question: Chegg doesnt have a solution for this problem. I need help to understand how to get answer. The book answers I do not understand. Problem

Chegg doesnt have a solution for this problem. I need help to understand how to get answer. The book answers I do not understand.

Problem 7.26.

For all maturities the US dollar (USD) interest rate is 7% per annum and the Australian dollar (AUD) rate is 9% per annum. The current value of the AUD is 0.62 USD. In a swap agreement, a financial institution pays 8% per annum in AUD and receives 4% per annum in USD. The principals in the two currencies are $12 million USD and 20 million AUD. Payments are exchanged every year, with one exchange having just taken place. The swap will last two more years. What is the value of the swap to the financial institution? Assume all interest rates are continuously compounded.

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