Company A can borrow yen at 9.6 percent and dollars at 8.1
percent. Company B can borrow
yen at 8.1 percent and dollars at 7.6 percent. If A would like
to borrow yen and B would like to
borrow dollars. The financial intermediary charges a fee of
0.15. The gain is evenly split
between the two parties and exchange rate risk assumed by the
intermediary. Design a swap.
What is company A’s yen rate leg and B’s dollar rate leg in the
swap?
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