Casio Timex

Japanese Yen ( Floating) LIBOR+0.75 LIBOR+1.5%

US Dollars (FIXED) 5.9% 6.3%

a) Which company has a comparative advantage in the US dollar fixed-rate market, and which company has a comparative advantage in Japanese YEn floating rate Market?

b) Suppose Casio wants to expand operations in the US and wants to borrow the US dollar fixed market rate, and TIMEX wants to expand in Japan and wishes to borrow in the Japanese Yen Floating rate market. a financial institution is planning on arranging a currency swap and requires a 10 basis point spread, what rates of interest will Casio and Timex end up paying?