The answer is A. Why?

15. Consider the dollar- and euro-based borrowing opportunities of companies A and B. 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. Suppose the firms agree to borrow in their home currencies and then engage in a swap. Is this mutually beneficial swap equally fair to both parties? Assume there is no swap bank and the two firms interact directly. A Yes, A will be better off by 1 percent on 1m; B by 1 percent on $2m and $2.00= 1.00. B Yes, QSD=[7%6%$2.00/1.00]($8%$9%)=$2%+$1%=$3%. C No, company A borrows at 6 percent in euro but company B borrows at 8 percent in dollars. D No, company A saves 1 percent in euro but company B saves only 1 percent in dollars when the spot exchange rate is $2.00=1.00A is twice as better off as B