Suppose in problem 5 that because of currency risk, Viacom would prefer to have dollar debt, and

Question:

Suppose in problem 5 that because of currency risk, Viacom would prefer to have dollar debt, and Gaz de France would prefer to have euro debt. How could an investment bank structure a currency swap that would allow each of the firms to issue bonds denominated in the currency in which the firm has a comparative advantage while respecting the firms’ preferences about currency risks?

Data from problem 5:

Suppose Viacom can issue $100,000,000 of debt at an AIC of 9.42%, whereas Gaz de France can issue $100,000,000 of debt at an AIC of 10.11%. Suppose that the exchange rate is $1.35/20A€. If Viacom issues euro-denominated bonds equivalent to $100,000,000, its AIC will be 8.27%, whereas if Gaz de France issues such bonds, its all-in cost will be 9.17%. Which firm has a comparative advantage when borrowing euros? Why?

Exchange Rate
The value of one currency for the purpose of conversion to another. Exchange Rate means on any day, for purposes of determining the Dollar Equivalent of any currency other than Dollars, the rate at which such currency may be exchanged into Dollars...