Question: How do you solve this ? (please show work ) A US-based Company A would like to take out a 5-year loan in EUR. An
A US-based Company A would like to take out a 5-year loan in EUR. An EU-based Company B would like take out a 5-year loan in USD. Their borrowing rates in USD and EUR are shown below. Borrowing Rate in USD Borrowing Rate in EUR US Company A 5.00% 8.50% EU Company B 5.50% 7.00% Suppose the QSD is shared as follows: 60 bp goes to US Company A, 30 bp goes to EU Company B, and remaining is kept by the swap dealer. Based on above, the swap dealer's bid and the ask rate for EUR should be 756 and 8.5% Answered 8.5% and 7% rrect Answer 7% and 7.996 6.4% and 7
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