Question
Companies A and B receive the following interest rate quotes: Euro Canadian Dollar Company A LIBOR + 0.5% 5.2 % Company B LIBOR + 0.9%
Companies A and B receive the following interest rate quotes:
Euro Canadian Dollar
Company A LIBOR + 0.5% 5.2 %
Company B LIBOR + 0.9% 6.5% .
Assume that A wants to borrow euro loan and B wants to borrow Canadian dollars. A financial institution is planning to arrange a swap and requires a 30-basis-point spread.
- Illustrate the swap with a diagram.
- What are the effective borrowing costs for A and B?
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International Financial Management
Authors: Cheol S. Eun, Bruce G.Resnick
6th Edition
71316973, 978-0071316972, 78034655, 978-0078034657
