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15 Mar 2023
Company A, wishes to borrow U.S dollars at a fixed rate of interest. Company B, wishes to borrow Japanese yen at a fixed rate of interest. The amounts required by the two companies are roughly the same at the current exchange rate. The companies have been quoted the following interest rates:
Company A
Yen -4.8%
Dollars-9.6%
Company B
Yen -9.6%
Dollars- 10.0%
Design a swap that will net a bank, acting as intermediary, 20 basis points per annum. Make a swap appear equally attractive to the two companies and ensure that all foreign exchange risks are not assumed by the company A and bank.
Company A, wishes to borrow U.S dollars at a fixed rate of interest. Company B, wishes to borrow Japanese yen at a fixed rate of interest. The amounts required by the two companies are roughly the same at the current exchange rate. The companies have been quoted the following interest rates:
Company A
Yen -4.8%
Dollars-9.6%
Company B
Yen -9.6%
Dollars- 10.0%
Design a swap that will net a bank, acting as intermediary, 20 basis points per annum. Make a swap appear equally attractive to the two companies and ensure that all foreign exchange risks are not assumed by the company A and bank.
27 Mar 2023
Read by 3 people
Read by 3 people
Read by 3 people
Read by 3 people
15 Mar 2023
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