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Company A wishes to borrow U.S. dollars at a fixed rate of interest. Company B wishes to borrow sterling at a fixed rate of interest.
Company A wishes to borrow U.S. 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): Company A Company B Sterling 11.0% US Dollars 7.0% 62% L 10.6% Required: 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 Company Bank |
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