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Alpha Corp is a manufacturing company operating in Europe. In a recent board meeting its directors decided to expand the companys operations in America by

Alpha Corp is a manufacturing company operating in Europe. In a recent board meeting its directors decided to expand the companys operations in America by setting up a subsidiary over there. The companys CFO estimates that the project is going to cost $15 million. The company can get a Euro loan at 4.5% and a Dollar loan at 7.5%. Beta Corp is a manufacturer of heavy machinery and is based solely in the U.S. The company wants to expand its operations in Europe and estimates that the cost of setting up a factory in Europe is 10 million. The company can get a Dollar loan at 6.5% and a Euro loan at 5.5%. The current $/ exchange rate is $1.5/. Both companies decide to enter into a currency swap. 9. Which of the following statements regarding the payments made at the inception of the swap is most accurate? A. Alpha Corp will make a payment to Beta Corp amounting to $15 million. B. Beta Corp will make a payment to Alpha Corp amounting to $15 million. C. No amount will be exchanged at the inception of the swap. 10. At the first settlement date, Beta Corp will most likely: A. Pay 450,000 to Alpha Corp. B. Pay 550,000 to Alpha Corp. C. Receive 550,000 from Alpha Corp. 11. At the second settlement date, Alpha Corp will most likely: A. Pay $975,000 to Beta Corp. B. Receive $1,125,000 from Beta Corp. C. Receive 975,000 from Beta Corp. 12. At expiration Beta Corp will most likely: A. Pay 450,000 to Alpha Corp. B. Receive $15 million from Alpha Corp. C. Receive 10 million from Alpha Corp.

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