Consider the dollar- and euro-based borrowing opportunities of companies A and B.

Euro Borrowing : A - euro 7% B- euro 6%

$ borrowing- A- $ 10% B 9%

A is U.S. -based MNC with AAA credit; B is an Italian firm with AAA credit. Firm A wants to borrow euro 1,000,000 for one year and B wants to borrow $2,000,000 for one year. Is there a mutually beneficial swap?

Answer rating: 100% (QA)

To determine if a mutually beneficial swap exists we need to compare the borrowing costs of each com... View the full answer