$\begin{array}{lcc}
&\text { Canadian interest rate }&\text {french interest rate }\
& \text { on CS loans } & \text { on euro loans } \
\text { Canadian firm } & 5 \% & 5.5 \% \mathrm{a} \
\text { Freneh firm } & 6 \% & 5.5 \%
\end{array}$
The Canadian firm wants to borrow in euros and the French firm wants to borrow in Canadian dollars.
-If the Canadian and the French firms share the interest savings from the currency swap equally,the Canadian firm will pay on its French debt after the swap:
A) The same as without the swap.
B) 5%.
C) 5.5%.
D) 6%.

Question

$\begin{array}{lcc} 
&\text { Canadian interest rate }&\text {french interest rate }\
& \text { on CS loans } & \text { on euro loans } \
\text { Canadian firm } & 5 \% & 5.5 \% \mathrm{a} \
\text { Freneh firm } & 6 \% & 5.5 \%
\end{array}$
The Canadian firm wants to borrow in euros and the French firm wants to borrow in Canadian dollars.
-If the Canadian and the French firms share the interest savings from the currency swap equally,the Canadian firm will pay on its French debt after the swap:
A) The same as without the swap.
B) 5%.
C) 5.5%.
D) 6%.

Quizplus · Accepted Answer

The Canadian firm initially faces a 5.5% interest rate on euro loans. By swapping with the French firm, which has a 5.5% rate on euro loans and a 6% rate on Canadian loans, they can share the savings. The swap allows the Canadian firm to effectively pay 5% on its euro debt, which is the rate the French firm would pay on Canadian loans, minus the shared savings.

The Canadian Firm Wants to Borrow in Euros and the }