Suppose that Delta wants to borrow 32 million CAD and Air Canada wants to borrow 24 million
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Question:
Suppose that Delta wants to borrow 32 million CAD and Air Canada wants to borrow 24 million USD. Each firm is offered the following loan rates.
| Firm | U.S. Bank Rate (USD) | Canadian Bank Rate (CAD) |
| Delta | 4.8% | 5.9% |
| Air Canada | 5.4% | 6.1% |
Design a swap where a financial intermediary gets 0.08% of margin and takes all the exchange rate risk. Each firm evenly splits the remaining spread margin. As a result of the swap, at what rate is Delta effectively borrowing in CAD? Use the Currency Swap Template to answer the question. Please report your answer in percentage. 7.22% would be 7.22.
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