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Company A wishes to borrow Yen at a fixed rate of interest, Company B wishes to borrow US pollars at a fised rate of interest.

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Company A wishes to borrow Yen at a fixed rate of interest, Company B wishes to borrow US pollars at a fised rate of interest. The amounts required by two companies are rtustd for differential rates per annum (adjusted for differential required by two companies are roughly the same at tax effects): US Dollars Company A CompanyB Yen 8.6% 7.0% 46% 4.3% You are designing a swap that will net the f differences). ary 0.3% per. annum (ignore the currency a) How much each company may gain from the SWAP? (5 points) 0y the bank. Make sure to write down, interest rates that each party is paying (and/or receiving) a currencies; and to draw appropriate arrows that show the direction of payment. (10 points) b) Plot a diagram showing the interest payments under the swap in which all foreign exchange risk is

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