Axil CorpHas Not Tapped the Deutsche Mark Public Debt Market Because

question 4

Multiple Choice

Axil Corp.has not tapped the Deutsche mark public debt market because of concern about a likely appreciation of that currency and only wishes to be a floating-rate dollar borrower,which it can be at LIBOR + 1%.Bevel Corp.strongly prefers fixed-rate DM debt,but it must pay 1.5% more than the 6 1/4% coupon that Axil's DM notes would carry.Bevel,however,can obtain Eurodollars at LIBOR + ½%.
-What is the maximum possible cost savings to Bevel from engaging in a currency swap with Axil?

• A)1%
• B)75%
• C)2%
• D)1.25%

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Definitions:

Service Business

A business that provides intangible products or services to customers rather than physical goods.

Closing Entries

The entries that transfer the balances of the revenue, expense, and drawing accounts to the owner’s capital account.

Ratio of Sales

A financial metric used to analyze a company's performance, efficiency, or market position, calculated by comparing sales figures to various other components.

Assets

The resources owned by a business.