Question: In a fixed-for-fixed currency swap, 4% on a US dollar principal of $160 million is received and 5% on a British pound principal of 100

In a fixed-for-fixed currency swap, 4% on a US dollar principal of $160 million is received and 5% on a British pound principal of 100 million pounds is paid. The current exchange rate is 1.55 dollar per pound. Interest rates in both countries for all maturities are currently 6% (continuously compounded). Payments are exchanged every year. The swap has 2.5 years left in its life.

What is the value of the swap in terms of a portfolio of foward contracts?

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