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.

Consider the situation of firm A and firm B. The current exchange rate is $1.50/. Firm A is a U.S. MNC and wants to borrow 40 million for 2 years. Firm B is a French MNC and wants to borrow $60 million for 2 years. Their borrowing opportunities are as shown; both firms have AAA credit ratings. A B $ $ 7% $8% 68 5 Act as a swap bank and quote bid and ask prices to A and B that are attractive to A and B and promise to make at least 20bp for your firm. USD Bid Ask Euro Bid Ask Short Answer Toolbar navigation U A