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2. Firm B, with a better credit rating, has lower borrowing costs in both types of borrowing. Firm A and Firm B face the following
2. Firm B, with a better credit rating, has lower borrowing costs in both types of borrowing. Firm A and Firm B face the following rate structure, and would like to enter into a currency swap: $ Fixed Fixed Firm A $9.6% 4.6% Firm B $8.0% 2.0% a) In what type of borrowing does Firm A have a comparative advantage? Why? b) In what type of borrowing does Firm B have a comparative advantage? Why? c) What is the maximum cost savings through a swap?
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