can someone help me with this question. Am not undestanding the calculation of value of the $ fixed side and value of € fixed side (in €) .Thanks.

- A bank entered into a 1-year currency swap with quarterly payments 200 days ago by agreeing to swap $1,000,000 for €800,000. The bank agreed to pay an annual fixed rate of 5% on the €800,000 and receive a fixed rate of 4.2% on the $1,000,000. Current LIBOR and Euribor rates and present value factors are shown in the following table. Rate Present Value Factor 70-day LIBOR 4.0% 0.9923 90-day LIBOR 4.4% 0.9891 160-day LIBOR 4.8% 0.9791 180-day LIBOR 5.2% 0.9747

70-day Euribor 5.2% 0.9900 90-day Euribor 5.6% 0.9862 160-day Euribor 6.1% 0.9736 180-day Euribor 6.3% 0.9695 The current spot exchange rate is €0.75 per $1.00. The value of the swap to the bank today is closest to: A. –$64,888. B. –$42,049. C. $42,049.

Solution given

coupon on $ fixed side = $1,000,000 × (0.042 / 4) = 10,500 value of the fixed side = (0.9923 × $10,500) + (0.9791 × $1,010,500) = 999,800 coupon on € fixed side = €800,000 × (0.05 / 4) = €10,000 value of € fixed side (in €) = (0.9900 × €10,000) + (0.9736 × €810,000) = €798,516 value of € fixed side (in ) = € value of swap to bank = $999,800 – $1,064,688 = –$64,888