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Cross-currency interest rate swap

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Last year Tarbo Corp. entered into a 4-year cross-currency interest rate swap to receive British pounds and pay U.S. dollars. Tarbo has just decided to unwind the swap, three years before maturity. How much must Tarbo pay in cash to its swap counterparty at termination date? Briefly interpret the result.

All data for this swap are provided below.

-USD-denominated notional principal last year = $13,900,000

-GBP-denominated notional principal last year = £10,000,000

-$ 4-year swap rates last year: bid = 1.50%; ask = 1.54%

-£ 4-year swap rates last year: bid = 1.26%; ask = 1.31%

-Current spot rate ($/£) = $1.3560/£

-Current $ interest rate for all maturities = 1.36%

-Current £ interest rate for all maturities = 1.20%

Reference no: EM133077919

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