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Suppose the five-year fixed-rate borrowing costs to General Electric and Qantas Airways in U.S. dollars (USD) and Australian dollars (AUD) have been quoted the following rates per annum (adjusted for differential tax effects):

USD AUD

General Electric 5.0% 7.6%

Qantas Airways 7.0% 8.0%

Design a currency swap that will make all parties involved (bank, two companies) attractive assuming that General Electric wants to borrow 20 million AUD and Qantas Airways wants to borrow 15 million USD and the current exchange rate (USD per AUD) is 0.75.

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92882557

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