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Two companies are offered the following interest rates: BRIGHT Corporation ALGO Corporation US dollars (fixed rate) Canadian dollars (fixed rate) 3.0% p.a. 4.2% p.a. 2.8%
Two companies are offered the following interest rates: BRIGHT Corporation ALGO Corporation US dollars (fixed rate) Canadian dollars (fixed rate) 3.0% p.a. 4.2% p.a. 2.8% p.a. 3.7% p.a. A financial institution is planning to arrange a swap and requires a 10 basis point spread. If the swap is equally attractive to both companies, which one of the following statements is most accurate? The comparative advantage is 0.2%. By engaging in the currency swap, each party will improve their borrowing rate by 0.15%. None of the other answer choices are correct. The currency swap will allow ALGO to gain access to BRIGHT's comparatively better CAD rates. BRIGHT has a comparative advantage in USD rates
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