• Canawacta Tioga is the CFO for Wyalusing Corporation, a multinational manufacturing company based in Canada. One year ago, Wyalusing issued fixed-rate coupon bonds in Canada. Tioga now expects Canadian interest rates to fall and remain low for three years. During this three-year period, Tioga wants to use a par interest rate swap to effectively convert the fixed-rate bond coupon payments into floating-rate payments.

Explain how to construct the swap that Tioga wants to use with regard to the swap:

• Wyalusing will soon be building a new manufacturing plant in the United States. To fund construction of the plant, the company will borrow in its home currency of CAD because of favorable interest rates. Tioga plans to use a cross-currency basis swap so that Wyalusing will borrow in CAD but make interest payments in USD.