1. Company A and B would pay the following rates when issuing either variable-rate or fixed-rate bonds. Company Fixed-Rate Bond Variable-Rate Bond A 4% LIBOR+1.5% B LIBOR 3% If Company A prefers to borrow at a variable rate and Company B prefers to borrow at a fixed rate, can they agree on a swap contract that make them equally better off? If so, please explain in details on the arrangement and the swap contract. Please see an email I sent out on this topic on how you would answer this question. [10 points) 2. Three exchange rates from three different banks 0.91 EUR : 1 USD 1.4 CAD: 1 USD 1.7 CAD: 1 EUR Can an investor make arbitrage profit with 100,000 EUR? If yes, please describe how and what is the amount of profit? How much should EUR be per one USD to prevent arbitrage opportunity? [10 points)