A US-based corporation wants to raise fixed-rate dollar financing.It finds it can borrow fixed in USD at 6% per annum.It can also borrow fixed in JPY at 2% per annum.It can enter into a USD-JPY currency swap in which 2% fixed JPY interest rates are exchanged for USD Libor.Lastly,the company can enter into a USD plain vanilla fixed-vs-Libor interest rate swap with a fixed rate of 5.75%.Given this information,the company's best option is to
A) Raise USD fixed rate financing directly.
B) Raise USD floating rate financing at Libor plus 25 basis points and swap into fixed.
C) Raise fixed-rate JPY financing and leave it unhedged (i.e. ,do not enter into any swaps) .
D) Raise JPY fixed rate financing,swap into USD fixed using a currency swap and an interest-rate swap.
Correct Answer:
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