You work at the currency swap desk at a large global bank. Two of your clients are multi-national corporations. The first is Cava, Inc., based in Paris, but with subsidiary operations in Mexico. The other is Hola, Inc., based in Monterrey, Mexico, but with subsidiary operations in Paris. Since you have a long working-relationship with both firms, you have access to their financing needs for some upcoming projects. You summarize the following 5-year investment needs:

• Cava, Inc., needs 30 million pesos for investment in its Mexico-based subsidiary.
• Hola, Inc., needs 1.75 million euros for investment in its subsidiary in Paris.
• The current exchange rate in the spot market is 17.143 pesos per euro.

	Borrowing Opportunity in Pesos	Borrowing Opportunity in Euros
Cava, Inc.	11%	7%
Hola, Inc.	10%	8%

Suggest a currency swap arrangement, with your bank acting as the Swap Bank, so that your clients can borrow at a beneficial rate without facing currency risk. Your bank should also profit, but not with a front-end load or a separate fee. I want your bank to profit by retaining part of one or more of the currency swap transaction legs. You do not have to show all of the cash flows if you can explain clearly what rates are being offered/charged/borrowed by each party and how they are made better off with the currency swap that you propose.