Question
Unilever (UK firm) would like to borrow USD, and Coca-Cola (US firm) wants to borrow GBP. Coca-Cola can borrow USD at 6.50% and GBP at
Unilever (UK firm) would like to borrow USD, and Coca-Cola (US firm) wants to borrow GBP. Coca-Cola can borrow USD at 6.50% and GBP at 8%. Unilever can borrow USD at 7% and pounds at 7%.Supposing the maturity of their loans is 5 years, what is the annual savings expressed in basis points (bps) in their respective cost of borrowing if they arrange a swap agreement and do not share their cost savings with each other? a. Coca-Cola (100bps), Unilever (100bps) b. Coca-Cola (75bps), Unilever (75bps c. Coca-Cola (50bps), Unilever (50bps d. Coca-Cola (100bps), Unilever (50bps)
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