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Business, 27.11.2019 20:31 erbs2003

Company x wishes to borrow u. s. dollars at a fixed rate of interest. company y wishes to borrow japanese yen at a fixed rate of interest. the amounts required by the two companies are roughly the same at the current exchange rate. the companies are subject to the following interest rates, which have been adjusted to reflect the impact of taxes:
yen dollars
company x 5.0% 9.6%
company y 6.5% 10.0%
design a swap that will net a bank, acting as intermediary, 50 basis points per annum. make the swap equally attractive to the two companies and ensure that all foreign exchange risk is assumed by the bank.

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