Company X wants to borrow $10,000,000 floating for 1 year; company Y wants to borrow 5,000,000 fixed for 1 year. The spot exchange rate is $2 = 1 and IRP calculates the one-year forward rate as $2.00 (1.08)/1.00 (1.06) = $2.0377/1. Their external borrowing opportunities are:

	$ Borrowing				Borrowing
	Cost				Cost
Company X	$	8	%			7	%
Company Y	$	9	%			6	%

A swap bank wants to design a profitable fixed-for-fixed currency swap. In order for X and Y to be interested, they can face no exchange rate risk.

Company X

A) is probably British.

B) is probably American.

C) has a comparative advantage in borrowing pounds.

D) is probably British, and has a comparative advantage in borrowing pounds.