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Q1. Consider the following table describing the fixed borrowing rates available for Firm C in Canada and Firm A in the US: FIRM/CURRENCY USD CAD

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Q1. Consider the following table describing the fixed borrowing rates available for Firm C in Canada and Firm A in the US: FIRM/CURRENCY USD CAD A 6% 8.6% 8% 9% A wants to borrow in CAD and C wants to borrow in USD. Use the relative advantage argument to show an indirect swap in which A and C reduce their borrowing rates by the same % while SD bears the entire exchange rate risk. Q1. Consider the following table describing the fixed borrowing rates available for Firm C in Canada and Firm A in the US: FIRM/CURRENCY USD CAD A 6% 8.6% 8% 9% A wants to borrow in CAD and C wants to borrow in USD. Use the relative advantage argument to show an indirect swap in which A and C reduce their borrowing rates by the same % while SD bears the entire exchange rate risk

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