Consider two companies: Honda and IBM. Honda wants to borrow US$ for the following 5 years at

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Consider two companies: Honda and IBM.

Honda wants to borrow US$ for the following 5 years at a fixed rate, while IBM wants to borrow Yen also for the following 5 years at a fixed rate. The rates available to two companies in US$ and Yen markets are shown below.

	US$	Yen
Honda	8.0%	7.6%
IBM	5.4%	6.6%

Required

A. What is the total gain from the currency swap?

B. Which firm has the comparative advantage in US dollar market, IBM or Honda?

Related Book For answer-question

Financial Institutions Management A Risk Management Approach

ISBN: 978-0071051590

8th edition

Authors: Marcia Cornett, Patricia McGraw, Anthony Saunders

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Posted Date: May 30, 2023 12:52 AM

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Consider two companies: Honda and IBM. Honda wants to borrow US$ for the following 5 years at

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Financial Institutions Management A Risk Management Approach

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