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Problem 3.2. A U.S. company wants to borrow sterling at a fired rate of interest. A British company wants to borrow U.S. dollars at a
Problem 3.2. A U.S. company wants to borrow sterling at a fired rate of interest. A British company wants to borrow U.S. dollars at a fixed rate of interest. They have been quoted the following interest rates (per annum): US company British company US Dollars Sterling 9.4% 8.8% 8.8% 7.6% Design a swap that will net a bank, acting as intermediary, 10 basis points per annum and that will produce a gain of 25 basis points per annum for each of the two companies. Problem 3.2. A U.S. company wants to borrow sterling at a fired rate of interest. A British company wants to borrow U.S. dollars at a fixed rate of interest. They have been quoted the following interest rates (per annum): US company British company US Dollars Sterling 9.4% 8.8% 8.8% 7.6% Design a swap that will net a bank, acting as intermediary, 10 basis points per annum and that will produce a gain of 25 basis points per annum for each of the two companies
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