Question
GO Ltd., a Danish company, wishes to borrow US dollars at a fixed rate of interest. DGL Ltd., a US-based company, wishes to borrow Danish
GO Ltd., a Danish company, wishes to borrow US dollars at a fixed rate of interest. DGL Ltd., a US-based company, wishes to borrow Danish krone at a fixed rate of interest. The two companies have been offered the following rates per annum (adjusted for differential tax effects): Company US dollar ($) Danish Krone (Kr) GO Ltd. 7.5% ($) 4.4% (Kr) DGL Ltd. 8.1% ($) 5.6% (Kr). Suppose a swap dealer acts as the intermediary in the swap agreement. Arrange a swap that both companies will be mutually benefited and the swap dealer will earn 20 basis points per annum.
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