Company A, based in Switzerland, would like to borrow $10 million at a fixed rate of interest.

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Company A, based in Switzerland, would like to borrow $10 million at a fixed rate of interest. Because the company is not well known, however, it has not been able to find a willing U.S. lender. However, the company can borrow SF 17,825,000 at 11% per year for five years. Company B, based in the United States would like to borrow SF 17,825,000 for five years at a fixed rate of interest. It has not been able to find a Swiss lender. However, it has been offered a loan of $10 million at 9% per year. Five-year government bonds are yielding 9.5% and 8.5% in Switzerland and the United States, respectively. Suggest a currency swap that would net the financial intermediary 0.5% per year.
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