Consider the situation of firm a and firm b the

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International Financial Management
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Chapter 17 / Exercise 32
International Financial Management
Madura
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74)Consider the situation of firm A and firm B. The current exchange rate is $1.50/€. Firm Ais a U.S. MNC and wants to borrow €40 million for 2 years. Firm B is a French MNC andwants to borrow $60 million for 2 years. Their borrowing opportunities are as shown; bothfirms have AAA credit ratings.$A$7 %6 %B$8 %5 %Explain how this opportunity affects which swap firm A will be willing toparticipate in.74)
Topic:Miscellaneous Swap Problems75)Consider the situation of firm A and firm B. The current exchange rate is $1.50/€. Firm Ais a U.S. MNC and wants to borrow €40 million for 2 years. Firm B is a French MNC andwants to borrow $60 million for 2 years. Their borrowing opportunities are as shown; bothfirms have AAA credit ratings.$A$7 %6 %B$8 %5 %Explain how firm B could use the forward exchange markets to redenominate a2-year €40m 5 percent euro loan into a 2-year USD-denominated loan.75)
Topic:Miscellaneous Swap Problems34
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International Financial Management
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Chapter 17 / Exercise 32
International Financial Management
Madura
Expert Verified
76)Consider the situation of firm A and firm B. The current exchange rate is $1.50/€. Firm Ais a U.S. MNC and wants to borrow €40 million for 2 years. Firm B is a French MNC andwants to borrow $60 million for 2 years. Their borrowing opportunities are as shown; bothfirms have AAA credit ratings.$A$7 %6 %B$8 %5 %If firm B could use the forward exchange markets to redenominate a 2-year €40m5 percent euro loan into a 2-year USD-denominated loan, what would be theinterest rate?76)
Topic:Miscellaneous Swap Problems77)Consider the situation of firm A and firm B. The current exchange rate is $1.50/€. Firm Ais a U.S. MNC and wants to borrow €40 million for 2 years. Firm B is a French MNC andwants to borrow $60 million for 2 years. Their borrowing opportunities are as shown; bothfirms have AAA credit ratings.$A$7 %6 %B$8 %5 %Explain how this opportunity affects which swap firm B will be willing toparticipate in.77)
Topic:Miscellaneous Swap Problems

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