Company X Wants to Borrow $10,000,000 Floating for 1 Year;

question 95

Multiple Choice

Company X wants to borrow $10,000,000 floating for 1 year; company Y wants to borrow £5,000,000 fixed for 1 year.The spot exchange rate is $2 = £1 and IRP calculates the one-year forward rate as $2.00*(1.08) /£1.00*(1.06) = $2.0377/£1.Their external borrowing opportunities are:
A swap bank wants to design a profitable interest-only fixed-for-fixed currency swap.In order for X and Y to be interested,they can face no exchange rate risk
What must the values of A and B in the graph shown above be in order for the swap to be of interest to firms X and Y?

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