Question 4 (06 Marks) An Australian company to raise YEN 100,000,000 is issuing AUD-dominated bonds and planning
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Question 4 (06 Marks)
An Australian company to raise YEN 100,000,000 is issuing AUD-dominated bonds and planning to convert AUD to YEN via a currency swap. The company expects interest rates in both Australia and Japan to fall.
(i) Should the swap be structured with interest paid at a fixed or a floating rate. Justify your answer.(03 marks)
(ii) Should the swap be structured with interest received at fixed or a floating rate. Justify your answer.(03 marks)
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