ABC PLC is based in the UK and would like to borrow $120,000 for one year to expand to the US market. DEF PLC is based i

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ABC PLC is based in the UK and would like to borrow $120,000 for
one year to expand to the US market.
DEF PLC is based in the US and would like to borrow £100,000 for
one year to expand to the UK market.
The GBPUSD exchange rate is 1.20. The table below presents the
annual rates the companies can borrow at: Borrow in $ Borrow in £
ABC PLC 4.5% 3.2% DEF PLC 3.6% 4.7%
Identify the total surplus that can be achieved by
negotiating a currency swap, assuming the exchange rate remains
unchanged a) £0 b) £1,100 c) £1,300 d) £2,400 e) £6,800
If the currency swap is intermediated by a financial
institution, identify the maximum margin the institution can charge
for the swap to be mutually beneficial a) 0bps b) 89bps c) 109bps
d) 129bps e) 149bps