Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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Unilever (UK firm) would like to borrow USD, and Coca-Cola (US firm) wants to borrow GBP. Coca-Cola can borrow USD at 6.50% and GBP
at 8%. Unilever can borrow USD at 7% and GBP at 7%. Supposing the maturity of their loans is 5 years, what is the annual savings
expressed in basis points (bps) in their respective cost of borrowing if they arrange a swap and do not share their cost savings with each
other?
а. Соса-Сola (100bps), Unilever (50bps)
b. Coca-Cola (75bps), Unilever (75bps)
С.
Coca-Cola (100bps), Unilever (100bps)
d. Coca-Cola (50bps), Unilever (50bps)
е.
None of the options in this question are correct.
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Transcribed Image Text:Unilever (UK firm) would like to borrow USD, and Coca-Cola (US firm) wants to borrow GBP. Coca-Cola can borrow USD at 6.50% and GBP at 8%. Unilever can borrow USD at 7% and GBP at 7%. Supposing the maturity of their loans is 5 years, what is the annual savings expressed in basis points (bps) in their respective cost of borrowing if they arrange a swap and do not share their cost savings with each other? а. Соса-Сola (100bps), Unilever (50bps) b. Coca-Cola (75bps), Unilever (75bps) С. Coca-Cola (100bps), Unilever (100bps) d. Coca-Cola (50bps), Unilever (50bps) е. None of the options in this question are correct.
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