American X wishes to borrow U.S. dollars at a fixed rate of interest. Corporation Y wishes to borrow Japanese Yen at a fixed rate of interest. The amounts required by the two companies are the same at the current exchange rates. The following interest rates are listed adjusted for taxes:

 

	Yen	Dollars
Company X	6.0%	9.10 %
Company Y	5.5%	11.20 %

 

Create a swap that will net a bank 40 basis points per annum. Make sure the swap is equally attractive to both companies and foreign exchange risk is assumed by the bank. 

American X wishes to borrow U.S. dollars at a fixed rate of interest. Corporation Y wishes to borrow Japanese Yen at a fixed rate of interest. The amounts required by the two companies are the same at the current exchange rates. The following interest rates are listed adjusted for taxes:

 

	Yen	Dollars
Company X	6.0%	9.10 %
Company Y	5.5%	11.20 %

 

Create a swap that will net a bank 40 basis points per annum. Make sure the swap is equally attractive to both companies and foreign exchange risk is assumed by the bank. 

Answer rating: 100% (QA)

Answer Company X would wish to borrow US dollars at a rate of 910 percent Com... View the full answer