There are two companies, A(US) and B (Germany). Company A is looking to hedge some of...

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There are two companies, A(US) and B (Germany). Company A is looking to hedge some of its Euro exposure by borrowing Euros. And company B is seeking dollars to finance some projects. Both companies want the equivalent of 200$ million at 3 years maturity time. In order to improve their borrowing conditions they decide to borrow in their own currencies and then swap the debt-service obligations. Assume next figures: Company A: - It wants to borrow at floating-rate. - It can borrow directly at LIBOR+0.5% at floating-rate and 6% at fixed rate. Company B: - It wants to borrow at fixed-rate. - It can borrow directly at LIBOR+0.2% at floating-rate and 7.3% at fixed rate. General: - Exchange rate $1/1 LIBOR year 1 2 LIBOR year LIBOR year 3 4% 5% 4,5% a) Summarize the debt-services payment that company A has to pay to B each year? There are two companies, A(US) and B (Germany). Company A is looking to hedge some of its Euro exposure by borrowing Euros. And company B is seeking dollars to finance some projects. Both companies want the equivalent of 200$ million at 3 years maturity time. In order to improve their borrowing conditions they decide to borrow in their own currencies and then swap the debt-service obligations. Assume next figures: Company A: - It wants to borrow at floating-rate. - It can borrow directly at LIBOR+0.5% at floating-rate and 6% at fixed rate. Company B: - It wants to borrow at fixed-rate. - It can borrow directly at LIBOR+0.2% at floating-rate and 7.3% at fixed rate. General: - Exchange rate $1/1 LIBOR year 1 2 LIBOR year LIBOR year 3 4% 5% 4,5% a) Summarize the debt-services payment that company A has to pay to B each year?

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