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A British firm needs 4M Australian $. An Australian firm needs 2M BP. There FX rate is 2 A$/BP. The British firm has access to a 10% fixed interest rate and also a variable rate of LIBOR. The Australian firm has access to a fixed interest rate of 7% and also a variable rate of LIBOR. The British firms need a fixed rate loan; the Australian firm needs a variable loan rate. Fill in the missing parts for interest rates to be swapped in a way that each party equally benefits from a swap deal: The Australian firm borrows at (BLANK) and lends it to the British firm at (BLANK) The British firm borrows at (BLANK) and lends it to the Australian firm at (BLANK) As a result, the effective interest rate to the British firm would be (BLANK) and to the Australian firm would be (BLANK) Answer for BLANK

Financial Management, Finance

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