If Japanese yen floating rates are well below US dollar floating rates,then a fairly-priced basis swap that exchanges Japanese floating rates (plus a spread) for US floating rates must have
A) a positive spread to compensate for the lower Japanese interest rates.
B) a negative spread to compensate for the likely appreciation of the yen against the dollar.
C) zero spread.
D) Any of the three are possible.
Correct Answer:
Verified
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