a) Using your own hypothetical examples, critically evaluate any two reasons why investors may use plain vanilla currency swaps. Write out and explain the swaps you have designed.

b) A Dublin based corporate treasurer tells you that she has just negotiated a five-year loan at a competitive fixed rate of interest of 3.2%. The treasurer explains that she achieved the 3.2% rate by borrowing at six-month LIBOR plus 150 basis points and swapping LIBOR for 1.7%. She goes on to say that this was possible because her company has a comparative advantage in the floating-rate market. Explain briefly what issue the treasurer has overlooked.