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10) Company A is based in Japan and has a subsidiary in the US that requires funding in USD. It can borrow at 2% in
10) Company A is based in Japan and has a subsidiary in the US that requires funding in USD. It can borrow at 2% in Japan. It decides to enter into a 120 million yen currency swap agreement with Company B in US for the next three years. Company B can borrow at 3% rate in the US. The exchange rate for the swap is 120 yen per US dollar. What's the cash flow exchanges between company A and B at the beginning of the Swap. What's the cash flow payment for company A during the interim years of the swap? What are the potential advantages for company A in this swap? a) b) c)
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