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LOS e: Explain how a company can generate savings by issuing a loan or bond in its own currency and using a currency swap to convert the obligation into another currency.
Q1. A U.S. firm that borrows dollars and uses a plain-vanilla currency swap to obtain euros for an investment in Europe is most likely trying to:
A) create a synthetic pay-fixed dollar loan.
B) increase the duration of the position.
C) lower borrowing costs.
Q2. From the borrower’s perspective, a plain-vanilla currency swap can create a synthetic fixed-rate euro loan when entered into as a:
A) fixed-rate receiver and combined with a fixed-rate dollar loan.
B) floating-rate receiver and combined with a floating-rate dollar loan.
C) floating-rate receiver and combined with a fixed-rate dollar loan.
Q3. A European firm can borrow at 8% in the U.S. and at 7% in Europe. A U.S. firm can borrow at 7% in the U.S. and at 8% in Europe. If the U.S. firm needs euros and the European firm needs dollars, then a currency swap could save each counterparty:
A) up to 1% (maximum) in a loan on the foreign currency.
B) a minimum of 2% a loan on the foreign currency.
C) a minimum of 1% in a loan on the foreign currency.
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发表于 2009-4-10 11:10
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