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 Bis a British MNC and wants to borrow $60 million for 2 years. Their borrowing opportunities are as shown, both firms have AAA credit ratings. A B $ $ 6% $7% 5% 4% The IRP 1-year and 2-year forward exchange rates are $2.00 x (1.06) _ 1.00 x (1.04) $2.0385 1.00 $2.00 X (1.06)2 F $) = 21.00 x (1.0492 $2.0777 21.00 21.00 USD Bid Ask 6% 6.1% pounds Bid Ask 4% 4.1% Explain how firm A could use two of the swaps offered above to hedge its exchange rate risk