MIL is a Argentinian MNC that has preferences floating rate dollar debt, which it can access directly at LIBOR + 1.70%. MSF has a strong preference for fixed-rate peso debt. However, because of its relatively-unknown presence in the Argentinian market, MSF must pay a 85-basis point premium above the 4% coupon rate that MIL peso-denominated notes would carry. MSF, however, can currently obtain floating Eurodollar funding at a rate of LIBOR + 0.95%. What is the maximum possible cost savings that MIL and MSF could share from a currency swap with each other?

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To determine the maximum possible cost savings from a currency swap between MIL and MSF we need to c... View the full answer