Question
Company A, a British manufacturer, wishes to borrow U.S. dollars at a fixed rate of interest. Company B, a U.S. multinational, wishes to borrow sterling
Company A, a British manufacturer, wishes to borrow U.S. dollars at a fixed rate of interest. Company B, a U.S. multinational, wishes to borrow sterling at a fixed rate of interest. They have been quoted the following rates per annum (adjusted for differential tax effects): Sterling US Dollars Company A 10.0% 6.0% Company B 11.6% 7.2% Design a swap that will net a bank, acting as intermediary, 8 basis points per annum and that will produce a gain of 16 basis points per annum for each of the two companies. please show if there is more than one solution
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