Question
Company A, a British manufacturer, wishes to borrow U.S dollars at a fixed rate of interest. Company B, a U.S. dollars at a fixed rate
Company A, a British manufacturer, wishes to borrow U.S dollars at a fixed rate of interest. Company B, a 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 dollar | |
| Company A | 11.0% | 7.0% |
| Company B | 10.6% | 6.2% |
A bank is planning to arrange a swap and requires a 10-based point spread If the swap is equally attractive to A and B,
What rates of interest will A and B end up paying?
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Financial Institutions Management A Risk Management Approach
Authors: Marcia Cornett, Patricia McGraw, Anthony Saunders
8th edition
978-0078034800, 78034809, 978-0071051590
