2. Company X, a British company, wishes to borrow U.S. dollars at a fixed rate o
ID: 2698352 • Letter: 2
Question
2. Company X, a British company, wishes to borrow U.S. dollars at a fixed rate of interest. Company Y, a U.S. company wishes to borrow British Pound at a fixed rate of interest. They have been offered the following rates; British pound (BP) U.s. Dollars Company X 11.0% 7.2% Company Y 10.6% 6.2% Which one the following swaps will net a bank 10 basis points per annum and will provide equal gains per annum for each of the two companies? Answer Let X pay 11.0% BP to outside, pay 5.55% $ to bank and let Y pay 6.2% on $ to outside and pay 9.95% on BP to the bank. Let X pay 11.0% BP to outside, pay 6.95% $ to bank and let Y pay 6.2% on $ to outside and pay 10.35% on BP to the bank. Let X pay 11.0% BP to outside, pay 7.55% $ to bank and let Y pay 6.2% on $ to outside and pay 10.95% on BP to the bank. all of the above. 2. Company X, a British company, wishes to borrow U.S. dollars at a fixed rate of interest. Company Y, a U.S. company wishes to borrow British Pound at a fixed rate of interest. They have been offered the following rates; British pound (BP) U.s. Dollars Company X 11.0% 7.2% Company Y 10.6% 6.2% Which one the following swaps will net a bank 10 basis points per annum and will provide equal gains per annum for each of the two companies? Let X pay 11.0% BP to outside, pay 5.55% $ to bank and let Y pay 6.2% on $ to outside and pay 9.95% on BP to the bank. Let X pay 11.0% BP to outside, pay 6.95% $ to bank and let Y pay 6.2% on $ to outside and pay 10.35% on BP to the bank. Let X pay 11.0% BP to outside, pay 7.55% $ to bank and let Y pay 6.2% on $ to outside and pay 10.95% on BP to the bank. all of the above. British pound (BP) U.s. Dollars Company X 11.0% 7.2% Company Y 10.6% 6.2%Explanation / Answer
X wishes to borrow US dollars at fixed rate abd Y wishes to borrow british pound
So the swap arrnagement should be in such a way that bank pays X US dollars and Y British pumnd and charge a commision of 10 basis point with equal gains for both company
the correct answer is B)
in this case the gains are equal for both company while bank charging commision of 10 basis point
Let X pay 11.0% BP to outside, pay 6.95% $ to bank and let Y pay 6.2% on $ to outside and pay 10.35% on BP to the bank.Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.