D Question 4 A is a U.S.-based MNC with AAA credit; B is an Italian firm with AAA credit. Firm A wants to borrow 1,000,000 for one year and B wants to borrow $2,000,000 for one year. The spot exchange rate is $2.00 - 1.00. The firms' external borrowing opportunities are (see Table 1): A B borrowing 7% 6% Bid 8% A swap bank makes the following quotes for 1-year swaps and AAA-rated firms against USD LIBOR (see Table2): EURO $ borrowing $8% $9% USD Ask 8.1% Bid 6% 1 pts Ask 6.1% O Firm A does 2 swaps with the swap bank, S at bid and at ask. Firm B does 2 swaps with the swap bank, S at ask and at bid. Firms A and B would each save 90bp and the swap bank would earn 20bp. O There is no mutually beneficial swap at these prices. O Firm A does 2 swaps with the swap bank, S at ask and at bid. Firm B does 2 swaps with the swap bank, $ at bid and at ask. Firms A and B would each save 90bp and the swap bank would earn 20bp. None of the above