A company based in the US has two subsidiaries, one in the UK (GBP) and the other in Egypt (EGP). These subsidiaries would like to receive a nominal 0.5% (annual) rate on their surplus balances. The US HQ can borrow at a rate of 7.0625% and assume a 7-day investment/borrowing timeframe.

Use all the available funds as shown below and assume 365-day basis for all calculations. Assume that each of the foreign subs will expect to end up with the same amount of funds as if invested locally. Any USD not used for funding can be invested at 0.5% over the period.

		Bid	Ask
Spot Rate	GBP/USD	1.5189	1.5195
Forward (7 Day)	GBP/USD	1.5191	1.5198
		Bid	Ask
Spot Rate	EGP/USD	0.7348	0.7351
Forward (7 Day)	EGP/USD	0.7351	0.7355

Balance:

USD = 1,500,000 (Deficit = need for funds) Rate = 7.0625%

GBP = 750,000 (Surplus = available funds) Rate = 0.50%

EGP = 500,000 (Surplus = available funds)

Determine if the US HQ should set swaps for the funding, or just borrow locally. Show calculations in details.