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A U.S. bank enters into a plain vanilla currency swap with a notional principal of US$100m (£67m). At each settlement date, the U.S. bank pays a fixed rate of 8% on the pounds received, and an English bank pays a variable rate equal to London Interbank Offered Rate (LIBOR) on the U.S. dollars received. Given the following information, what payment is made to whom at the end of year 2?
The U.S. bank pays:A. £5.36m and the English bank pays US$6m. B. US$5.5m and the English bank pays £5.36m. C. £5.36m and the English bank pays US$5.5m. |