Question: Question 17 4 pts Consider the dollar- and euro-based borrowing opportunities of companies A and B Firm Borrowing $Borrowing 7% $9% A B 6% $9%

Question 17 4 pts Consider the dollar- and euro-based borrowing opportunities

Question 17 4 pts Consider the dollar- and euro-based borrowing opportunities of companies A and B Firm Borrowing $Borrowing 7% $9% A B 6% $9% 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 1.00 and the one-year forward rate is given by ClIP B wants to borrow $2,000,000 for one year. The spot exchange rate is $2.00 as $2.00x(1.09)/1.00x (1.06) = $2.3108/1. Is there a mutually beneficial swap? Yes,QSD [7% - 6 %]x$2.00/1.00- ($9% - $9%) = $2% + $0% = $2% No, QSD 0 Yes, QSD 1% = (7% -6% ) -(9%-9% ) = 1% - ( 0 % ) = 1 % OYes, QSD [7% - 6%]- ($9% - $9%)x1.00/$2.00= 1%

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