Firms A and B face the following borrowing rates for a 5-year fixed-rate debt issue in U.S. dollars or euros:
B. Here is how the swap might work.
Step 1: Firm B borrows $1,000 at a 6% rate in the United States (where it has a comparative advantage) and is obligated to pay $60 per year for 4 years and $1,060 in the fifth year.

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The Answer of Firms A and B face the following borrowing rates for a 5-year fixed-rate debt issue in U.S. dollars or euros:
B. Here is how the swap might work.
Step 1: Firm B borrows $1,000 at a 6% rate in the United States (where it has a comparative advantage) and is obligated to pay $60 per year for 4 years and $1,060 in the fifth year.

Firms a and B Face the Following Borrowing Rates for a 5-Year