Consider the situation of firm A and firm B. The current exchange rate is $2.00/ Firm A is a U.S. MNC and wants to borrow 30 million for 2 years. Firm B is a British MNC and wants to borrow $60 million for 2 years. Their borrowing opportunities are as shown, both firms have AAA credit ratings.

$ f 10 A $6% E5% B $7% 10 The IRP 1-year and 2-year forward exchange rates are points F1 $2.00 X (1.06) $2.0385 $1.00 x (1.04) $1.00 eBook Print F2 $2.00 x (1.06)2 $2.0777 f1.00 x (1.04)2 $1.00 References USD pounds Bid Ask Bid Ask 6% 6. 1% 4% 4. 1% Explain how this opportunity affects which swap firm B will be willing to participate in