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Come up with a swap (principal + interest) for two parties A and B who have the following borrowing opportunities. The current exchange rate is $1.60 = €1.00. Company "A" wishes to borrow $1,000,000 for 5 years and "B" wants to borrow €625,000 for 5 years. You are a swap dealer. Quote A and B a swap that makes money for all parties and eliminates exchange rate risk for both A and B. Firms A and B are more concerned with what currency that they borrow in than whether the debt is fixed or floating.
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