Company A wishes to borrow Australian dollars at a fixed rate of interest. Company B wishes to borrow sterling at a fixed rate of interest. They have been quoted the following rates per annum (adjusted for differential tax effects): 7.0% in Australian Company A: 11.0% in Sterling; Dollars 6.2% in Australian Company B: 10.6% in Sterling; Dollars Design a swap that will net a bank, acting as intermediary, 10 basis points per annum and that will produce a gain of 15 basis points per annum for each of the two companies. Company A would choose to borrow at which of the following: 7.0% in Australian Dollars You Answered .6.2% in Australian Dollars Correct Answer 11.0% in Sterling Company A wishes to borrow Australian dollars at a fixed rate of interest. Company B wishes to borrow sterling at a fixed rate of interest. They have been quoted the following rates per annum (adjusted for differential tax effects): 7.0% in Australian Company A: 11.0% in Sterling; Dollars 6.2% in Australian Company B: 10.6% in Sterling; Dollars Design a swap that will net a bank, acting as intermediary, 10 basis points per annum and that will produce a gain of 15 basis points per annum for each of the two companies. If only the Financial Intermediary is exposed to currency risk how much will Company B pay the Financial Intermediary: You Answered 10.85% Correct Answer 10.45%