Question: Firm U.S. $ (USD) AUS $ (AUD) General Electric (GE) 9% 7.5% Qantas Airways 11% 8.5% The Qantas would like to borrow $25 million for

Firm U.S. $ (USD) AUS $ (AUD) General Electric (GE) 9% 7.5% Qantas Airways 11% 8.5% The Qantas would like to borrow $25 million for five years in US, while GE would like to issue a 5-year A$31.25 million bond in Australia. A swap dealer suggested to the firms that they could benefit by borrowing in the market where they have a comparative advantage and then agreeing on a fixed-for-fixed currency swap to revert to the currency they desired for their loan. Assume that both firms will equally share the potential benefits from the swap. Which market provides a comparative advantage to GE and Qantas in borrowing money?

		AUD for GE, USD for Qantas
		USD for GE, AUD for Qantas
		USD for GE, USD for Qantas
		AUD for GE, AUD for Qantas

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