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Company Alpha and Company Beta have the following borrowing opportunities shown at the end of this question. Spot exchange rate is $1.60/. Company Alpha is

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Company Alpha and Company Beta have the following borrowing opportunities shown at the end of this question. Spot exchange rate is $1.60/. Company Alpha is in Europe and wishes to borrow $1,000,000 at a floating rate for 5 years and company Beta is a U.S. firm that wants to borrow 625,000 for 5 years at a fixed rate of interest. Suppose you are a swap dealer. Quote Company Alpha and Beta a swap deal that makes money for all parties and eliminates exchange rate risk for both Company Alpha and Beta. (Hint: in your answer, you may need to cover the concept of comparative advantage, the quality spread difference, the all-in-cost for the companies, the profits earned by swap bank, and detail the cash flows.) Company Alpha 5% Company Beta 6% $ SLIBOR% $LIBOR + 172%

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