A US-Based Investor Enters into an Unhedged Cross-Currency Equity Swap $-$

Multiple Choice

A US-based investor enters into an unhedged cross-currency equity swap in which he pays returns on the S&P 500 index in dollars in exchange for receiving the returns on the FTSE 100 in pounds. At inception, the notional principal on the swap is $100 million, and the exchange rate is $1.60 = £ 1. Cash flows are exchanged every six months and the first six-month period has 182 days in it. At the end of the first six-month period, the raw returns on the S&P 500 are 8% and the raw returns on the FTSE 100 are 9%. The exchange rate at this point is $1.50 = £ 1. The investor's net cash flow on this first payment date is

A) $-$ $1million.
B) $+$ 0.165 million.
C) $+$ 0.438 million.
D) $+$ 1 million.