Firms A and B face the following borrowing rates for making a five-year fixed-rate debt issue in

Question:

Firms A and B face the following borrowing rates for making a five-year fixed-rate debt issue in U.S. dollars or Swiss francs:

Suppose that A wishes to borrow U.S. dollars and B wishes to borrow Swiss francs. Show how a swap could be used to reduce the borrowing costs of each company. Assume a spot exchange rate of 2 Swiss francs perdollar.

Exchange Rate
The value of one currency for the purpose of conversion to another. Exchange Rate means on any day, for purposes of determining the Dollar Equivalent of any currency other than Dollars, the rate at which such currency may be exchanged into Dollars...