Company A (a U.S. MNC) wants to borrow £10,000,000  at a fixed rate for five year. Company B (a U.K. MNC) wants to borrow $16,000,000  at a fixed rate for five year. Today's exchange rate is £1= $1.6. The information below summarizes what each company can do without using swaps.

$ Loans £ Loans

Company A 8.3 11.7

Company B 10.6 12.4

If Company A wants to save 0.3% of the £10,000,000 loan through a Swap Bank, and If Company B wants to save 0.2% of the $16,000,000 loan through a Swap Bank. How much can the Swap bank earn on pound (£) loans (in terms of %) after meeting Company A and Company B's demand? (if your answer is 1.34%, just enter "1.34". If your answer is -1.34%, just enter "-1.34").

Answer rating: 100% (QA)

Company A wants to borrow 10000000 and Company B wants to borrow 16000000 Today the exchange rate is ... View the full answer